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G r o w t h o u t l o o k c l o u d e d , P E G t o o h i g h…
Hero MotoCorp Ltd (HMCL) reported Q3FY12 numbers, which were
above our estimates with net sales at | 5983.6 crore (I-direct estimate: |
5913.6 crore), a 16.9% YoY and 3.4% QOQ jump. The volumes grew
11.3% YoY and 2.9% QoQ to 1.59 million units. Realisations on a per unit
basis jumped 0.4% QoQ at | 40,287. EBITDA margins reported were in
line with our estimates at 15.8% (down ~10 bps QoQ) as the benefits of
lower input costs were taken away due to rupee depreciation. The
depreciation rose to | 298.6 crore in the wake of higher royalty payment
(~| 228 crore) and increased normal depreciation with de-bottlenecking
of capacity. The PAT, thus, came slightly below our estimates at | 613.0
crore (I-direct estimate: | 627.4 crore) (up ~42.9% YoY) as Q3FY11
witnessed some exceptional charges above and below the EBITDA line.
Highlights of the quarter
HMCL had a relatively superior volume growth in comparison to the twowheeler industry with 11.3% rise at 1.59 million units. It gained 100 bps in
terms of market share at ~56% YoY in the domestic market. The
management has highlighted the fact that some early signs of weakness
seems to be evident in certain pockets of the industry. The capacity
expansion remains on track and is expected to touch 7.0 million units by
March 2012. The management also guided on the fact that its entry into
newer exports markets of Africa is imminent in as early as Q2FY13E. The
royalty amortisation outgo has rise to ~| 228 crore (| 205 crore in
Q2FY12) due to currency fluctuations. The quarter also marked HMCL
showcasing two new launches in the scooter segment in the auto-expo.
V a l u a t i o n
As stated in earlier reports, we remain jittery on high multiples and see
that the “growth premium” being assigned by the market is now highly
uncertain to HMCL. At the CMP of | 1946, it is trading at 16.2x FY12E EPS
of | 120.3, 14.9x FY13E EPS of | 130.3 and the PEG ratio of ~1.4x remains
high. Thus, we have cut our target multiple and valued it at 14.0x FY13E
EPS to arrive at a target price of | 1830 with a HOLD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
G r o w t h o u t l o o k c l o u d e d , P E G t o o h i g h…
Hero MotoCorp Ltd (HMCL) reported Q3FY12 numbers, which were
above our estimates with net sales at | 5983.6 crore (I-direct estimate: |
5913.6 crore), a 16.9% YoY and 3.4% QOQ jump. The volumes grew
11.3% YoY and 2.9% QoQ to 1.59 million units. Realisations on a per unit
basis jumped 0.4% QoQ at | 40,287. EBITDA margins reported were in
line with our estimates at 15.8% (down ~10 bps QoQ) as the benefits of
lower input costs were taken away due to rupee depreciation. The
depreciation rose to | 298.6 crore in the wake of higher royalty payment
(~| 228 crore) and increased normal depreciation with de-bottlenecking
of capacity. The PAT, thus, came slightly below our estimates at | 613.0
crore (I-direct estimate: | 627.4 crore) (up ~42.9% YoY) as Q3FY11
witnessed some exceptional charges above and below the EBITDA line.
Highlights of the quarter
HMCL had a relatively superior volume growth in comparison to the twowheeler industry with 11.3% rise at 1.59 million units. It gained 100 bps in
terms of market share at ~56% YoY in the domestic market. The
management has highlighted the fact that some early signs of weakness
seems to be evident in certain pockets of the industry. The capacity
expansion remains on track and is expected to touch 7.0 million units by
March 2012. The management also guided on the fact that its entry into
newer exports markets of Africa is imminent in as early as Q2FY13E. The
royalty amortisation outgo has rise to ~| 228 crore (| 205 crore in
Q2FY12) due to currency fluctuations. The quarter also marked HMCL
showcasing two new launches in the scooter segment in the auto-expo.
V a l u a t i o n
As stated in earlier reports, we remain jittery on high multiples and see
that the “growth premium” being assigned by the market is now highly
uncertain to HMCL. At the CMP of | 1946, it is trading at 16.2x FY12E EPS
of | 120.3, 14.9x FY13E EPS of | 130.3 and the PEG ratio of ~1.4x remains
high. Thus, we have cut our target multiple and valued it at 14.0x FY13E
EPS to arrive at a target price of | 1830 with a HOLD rating on the stock.
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