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Margins improve amid outlook concerns…
Hero Honda’s (HHL) Q4FY11 numbers were above our estimates with net
sales at | 5390.9 crore (I-direct estimate: | 5298.7 crore), a 30.8% YoY
and 4.4% QoQ jump. This was driven by high volume growth (23% YoY,
1.8% QoQ increase) along with per unit realisations improvement of 2.8%
QoQ. The improving product mix along with ~| 700 blended price hike in
Q4FY11 has helped the realisation jump. EBITDA margins reported were
at 15.4%, mainly due to adjustments in accounting policies. However, on
a like-to-like basis, margins improved ~110 bps QoQ mainly due to lower
RM/unit increases (1.1% QoQ). On the PAT front, HHL’s profits were
higher than our estimates at | 501.6 crore mainly due to a strong
operative performance. This PAT was reduced due to higher tax rate
(23.9%) due to the accounting policy adjustment.
Highlights of the quarter
HHL has seen volume growth of 30.8% YoY at 14.54 lakh units and has
maintained its overall motorcycle market share of ~55% in the domestic
market. It has undergone a | 300 crore capex to raise and de-bottleneck
its capacity to 6.15 million units and in FY12E expects to undertake ~|
800 crore of capex inclusive of a fourth plant of ~0.75 million capacity.
HHL has started to treat the ¥45 billion (| 2380 crore) payment towards
Honda Motors as an intangible asset and now would be amortising~| 170
crore in 14 quarters also leading to tax adjustments for this quarter. On
newer models, royalty would be charged at not more than 5% and would
be treated as before with the model fee being amortised.
Valuation
We are cautiously positive on the demand scene and improving product
mix. However, commodity price uncertainties and competition remain
concerns. At the CMP of | 1697, the stock is trading at 14.5x FY12E EPS
of | 114.2 and 13.9x FY13E EPS 124.8.. We have valued HHL at 13x FY13E
EPS of | 124.8 to arrive at a value of | 1622 per share. We maintain our
HOLD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Margins improve amid outlook concerns…
Hero Honda’s (HHL) Q4FY11 numbers were above our estimates with net
sales at | 5390.9 crore (I-direct estimate: | 5298.7 crore), a 30.8% YoY
and 4.4% QoQ jump. This was driven by high volume growth (23% YoY,
1.8% QoQ increase) along with per unit realisations improvement of 2.8%
QoQ. The improving product mix along with ~| 700 blended price hike in
Q4FY11 has helped the realisation jump. EBITDA margins reported were
at 15.4%, mainly due to adjustments in accounting policies. However, on
a like-to-like basis, margins improved ~110 bps QoQ mainly due to lower
RM/unit increases (1.1% QoQ). On the PAT front, HHL’s profits were
higher than our estimates at | 501.6 crore mainly due to a strong
operative performance. This PAT was reduced due to higher tax rate
(23.9%) due to the accounting policy adjustment.
Highlights of the quarter
HHL has seen volume growth of 30.8% YoY at 14.54 lakh units and has
maintained its overall motorcycle market share of ~55% in the domestic
market. It has undergone a | 300 crore capex to raise and de-bottleneck
its capacity to 6.15 million units and in FY12E expects to undertake ~|
800 crore of capex inclusive of a fourth plant of ~0.75 million capacity.
HHL has started to treat the ¥45 billion (| 2380 crore) payment towards
Honda Motors as an intangible asset and now would be amortising~| 170
crore in 14 quarters also leading to tax adjustments for this quarter. On
newer models, royalty would be charged at not more than 5% and would
be treated as before with the model fee being amortised.
Valuation
We are cautiously positive on the demand scene and improving product
mix. However, commodity price uncertainties and competition remain
concerns. At the CMP of | 1697, the stock is trading at 14.5x FY12E EPS
of | 114.2 and 13.9x FY13E EPS 124.8.. We have valued HHL at 13x FY13E
EPS of | 124.8 to arrive at a value of | 1622 per share. We maintain our
HOLD rating on the stock.
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