Tiger pushes margins in the woods! • Hero MotoCorp ::ICICI Securities

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Tiger pushes margins in the woods! • Hero MotoCorp (HMCL) reported revenues of | 6839 crore vs. our estimate of | 6877 crore (YoY decline of ~0.5%) with overall volumes down ~1.9% YoY, gross ASP up 0.6% YoY at | 44,287 • EBITDA margins came in at 12.0% (down ~110 bps YoY), lower than our estimates as other expenses shot up 100 bps YoY owing to increased branding expenses related to the global foray (Tiger Woods hired as brand ambassador for four years) • PAT at ~| 583 crore was lower on the back of a weak operational performance Weathering competition but brand fatigue big next challenge! HMCL has had a glorious past piggybacking on flagship brands like “Splendor/Passion”. However, the key challenge would be protecting the market share in the motorcycle segment even as the legacy Splendor family line faces increasing competition from the likes of HMSI. As competition continues to remain elevated, HMCL seems to have weathered the initial storm in the motorcycle segment. However, as the Indian economy recovers, we believe the decadal+ old brands (~65% of domestic HMCL’s volumes) would face increasing challenge to go up the aspiration/mind space ladder of the young of India (15-40 years) (~64% of driveable population>15<70 1.2="" 15x="" 17="" 1="" 2-w="" 2020="" 2="" 3036.="" 3="" 450="" a="" affordability="" aid="" aim="" also="" ambitious="" an="" and="" annual="" are="" arrive="" as="" at="" attractive="" auguring="" augurs="" auto="" bajaj="" be="" becoming="" before="" believe="" benefit="" brand="" brink="" business="" but="" by="" cagr="" capacity="" capex="" challenges="" clearly="" comes="" comfort="" commands="" competition="" consolidation="" constitute="" constraints.="" constricting="" control="" cost="" costs.="" crore="" debt="" decision="" different="" domestic="" e.g.="" earlier="" earnings="" eat="" ebitda="" economic="" economy="" either="" enhance="" eps="" ethos="" exercise="" expansion="" expect="" expectations="" expenses="" export="" financial="" focus="" for="" four="" franchise="" free="" from="" fy14.="" fy15e.="" fy17e="" fy18e="" gains="" generation="" global="" gross="" grow="" growth="" has="" have="" heavy="" high="" hmcl.="" hmcl="" hold="" however="" important.="" in="" increasing="" industry="" into="" is="" it="" its="" jump="" key="" lakh="" launched="" leadership="" leap="" light="" likely="" line="" lined="" logistics="" maintain="" major="" management="" manufacturer.="" margins="" market="" marketing="" mass-scale="" material="" mileage="" million="" most="" new="" next="" note="" of="" on="" or="" our="" outbound="" p="" perception="" perfectly="" positive="" possible="" price="" proactively="" products="" profile="" profitability="" profitable="" programme="" project="" purchase="" rating="" rationalisation="" ratios="" raw="" reach="" recommendation.="" recovery.="" recovery="" reiterated="" relatively="" remain="" remains="" return="" revival="" rise="" s="" sales="" savings="" saying="" scooter="" seems="" segment="" share.="" share="" shares="" side="" significantly="" slated="" spends="" standpoint="" started="" stock.="" strong="" struggling="" sustenance="" target.="" target="" tend="" the="" their="" three="" through="" thus="" timed="" to="" total="" touch="" tried="" two-wheeler="" two="" units="" up="" upgrading="" value="" vendor="" view="" volumes="" vs.="" wait="" way="" we="" well="" when="" which="" who="" will="" with="" would="" years="">
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http://content.icicidirect.com/mailimages/IDirect_Hero_MotoCorp_Q3FY15.pdf