The company sold 15.68 lakh units of motorcycles & scooters in Q4 FY21 as against 13.23 lakh units sold in Q4 FY20, registering a growth of 18.5% on a YoY basis. The company, however, recorded 19.8% drop in consolidated net profit to Rs 2917.75 crore on...

Hero MotoCorp is India's leading two-wheeler manufacturer in terms of unit volume sales in a calendar year. It holds nearly 50% of the market share in the Indian motorcycle market. The company has 7 manufacturing facilities,...

We maintain our BUY rating on the stock and have revised our TP downwards on account of near term headwinds to Rs 3,300/share (from Rs 3,850/share earlier) valuing the stock at 16x (17x earlier) its FY23E EPS.

Hero Motocorp: Hero's 4QFY21 PAT at INR 8.65bn (-20% QoQ) was largely in line with estimates; better-than-expected operating margins (13.9%) were offset by lower other income. While Hero will benefit from its premiumisation strategy in the medium term, the near-term demand uncertainty remains particularly in the entry-level segment, which accounts for ~32% of its bike volumes. An increased margin forecast of 13.4% in FY22E (+40bps from our earlier estimates) is offset by a lower volume growth outlook of 7% (from 10% earlier) to factor in plant shutdowns in 1QFY21. We maintain ADD with a target price of INR 3,240 at 17.5x FY23E EPS (at a 5% premium to its long-term average trading multiple). Dabur: Dabur posted 25% YoY revenue growth (HSIE 28%) with domestic business clocking 28% growth (3% 2-year CAGR). Domestic volume growth was at 25%, 3.5% 2-year CAGR. Despite challenging period, Dabur registered 15/12% domestic value/volume growth in FY21. Health supplement, OTC and oral care (60% of domestic business) posted robust 33% YoY growth in FY21. Market share gain, strong rural demand, distribution expansion, and aggressive marketing efforts supported the show in FY21. New launches across categories continued to witness strong traction with e-comm doubling its mix to ~6%. Gross margin was down by 35bps YoY in 4Q (muted entire FY21). Cost restoration was higher than expected (A&P;/employee/other expenses up by 54/17/18% YoY), leading to the EBITDA seeing a miss (up 26% YoY, HSIE 48%). We remain positive on Dabur's renewed focus on core strength (product innovation, rural distribution and target marketing). We maintain...

Hero MotoCorp's (HMCL) Q4FY21 operating performance was marginally ahead of our estimates due to an above-expected gross margin.

Hero MotoCorp (HMCL) reported a robust Q4FY21 performance. Total 2-W sales volume was at 15.68 lakh units, up 18% YoY, down 15% QoQ. Consequent net sales in Q4FY21 came in at | 8,686 crore, up 39.2% YoY but down 11.1% QoQ with blended ASPs at ~| 55,395/unit (up 4.6% QoQ). EBITDA margins were down 50 bps QoQ at 13.9%, with gross margins expanding 10 bps QoQ despite a spike in input costs over the past few months. PAT came in at | 865 crore, up 39.3% YoY. HMCL declared a final dividend of | 25/share for FY21 along with a special dividend of | 10/share....

Hero reported strong set of numbers in Q4. Volumes grew by 18.5% yoy while fell by 15% qoq to 1.57 mn units, while topline grew by 39.2% yoy to 86.86 bn as realizations witnessed a fantastic expansion of 12% yoy mainly on price hikes taken in Q4, model mix tilting towards big ticket models and low base of last year when BS 6 was playing as a dampener. The demand in Q4 remained strong even after the best quarter of Q3. Input costs to sales remained flattish sequentially at 70.4% despite commodity prices moving up by 5%. This was a big surprise for the street as other auto players were unable to arrest this surge. Due to this impact, EBITDA margins surged to 13.9%, while rising from 10.6% yoy and slightly falling qoq. The company managed the...

HMCL's Q4FY21 results beat our estimates as EBITDA/Adj. PAT were better by 6-12%. This was led by higher gross margins at 29.6% (PLe 28.9%) and lower other expenses at Rs8.7b (PLe Rs9.1b). We believe headwinds such as weak demand sentiments and RM would get mitigated by HMCL's increased focus on cost control (expect LEAP 2 savings of 200bp in FY21 to continue in FY22) and price hikes. We tweak FY22/23 EPS by +3%/-2% to factor in for...

Based on our sensitivity analysis of Hero Motocorp, if we assume lower growth rates from the second stage onwards, the impact on the stock values will be between 15-25%. With the growing acceptance of Electric Vehicles, we deliberate the longer term impact on the Enterprise Value of conventional auto OEMs. We believe that as EVs become mainstream, the terminal growth assumptions for passenger car OEMs will be at risk. Based on the sensitivity to changes in the terminal values for Maruti Suzuki, the impact on the DCF will be between 10-20%. For two-wheelers, the threat from EVs is more near term (over the next 3-5 years). Thus, the second stage DCF assumptions will be at risk for the incumbents.

However, the pace of transition is expected to be gradual with ICE engines remaining dominant in the near to medium term, particularly in India. We hosted the HSIE Autos and Mobility Conference, which was attended by five auto OEMs, five parts suppliers, and three startups, amongst others. The key themes that emerged from the conference were electrification and diversification, as the industry is preparing to diversify beyond combustion engines. OEMs are increasingly investing in EV and hybrid technology while auto parts companies are seeking to de-risk their customer mix by foraying into the non-auto space including defence, aerospace, industrial and renewable segments.

Hero MotoCorp Posts Above Estimates Q3 Numbers The country's largest two-wheeler maker Hero MotoCorp has posted a 13.7% increase in its consolidated profit after tax at Rs 1,019.18 crore for the third quarter ended December 31, 2020. The company had reported a consolidated net profit of Rs 901.81 crore in the October-...

We maintain our BUY rating on the stock and have revised our TP to Rs 3,850 (from Rs. 3,450 earlier) valuing the stock at 17x its FY23E EPS.

Container Corporation: CONCOR's 3QFY21 PAT at Rs 2.4bn (+36% YoY) was above estimates as the CTO benefitted from higher realisations (+7% QoQ). While the company will gain from the commissioning of the Dedicated Freight Corridor (a portion of it has already commenced), the resolution of the LLF remains an overhang. The operator has levied a surcharge of Rs 5,000/TEU on import containers at its prime TKD terminal (which accounts for ~15% of EXIM volumes), to partially offset the potential higher levies. We reiterate our ADD rating on the stock and set the target price of Rs 520 at 22x on FY23E EPS as our estimates are increased marginally by 3% over FY22-23E. Dalmia Bharat: Dalmia Bharat (DBEL) reported a strong 3QFY21 performance, led by robust volume growth (production ramp-up in east), healthy pricing (south-led) and continued cost controls. DBEL continues to gain market share in both east and south regions. Consolidated net sales/EBITDA grew 18/51% YoY to INR 28.6/6.9n respectively. DBEL has also used its cash balance to reduce debt. We continue to like the company for its continued strong volume and margin performance. Despite major ongoing expansions, the balance sheet remains well under control. We maintain our BUY rating on the stock with a revised target price of INR 1,470 (10.5x Dec'22E consolidated EBITDA). PNC Infratech: PNC Infratech (PNC) delivered an in-line 3QFY21 financial performance. Management commentary was upbeat on (1) FY21/22E order inflows pegged at Rs 100bn, (2) revenue guidance maintained at flattish YoY, (3) NWC improvement in 3QFY21, (4) initiation of talks on...

HMCL's Q3FY21 was operationally better with beat at EBITDA/PAT by ~10/13% respectively led by higher gross margins at 29.5% (PLe 28.7%) and lower other expenses at Rs9.5bn (PLe Rs9.9bn). Market share expansion continues with ~190bp gains in domestic markets and ~90bp gains in exports. While soft retails and RM pressures are near term headwinds, increased...

While the demand scenario is favourable, prevailing sharp increase in input costs are set to pressurise gross margins over the medium term in our view. While HMCL has undertaken price increases to pass on some escalations, we believe further hikes are likely to be gradual so as to not arrest ongoing demand recovery. The company's cost control programme LEAP 2 delivered ~100-125 bps savings in Q3FY21 and remains a powerful mitigation tool to offset some of the increases, however. We build in benefits of operating leverage over FY21E-23E as well as elevated raw material costs...

volumes, revenues, operating profits and realizations. Volumes grew by 9% yoy and 1.4% qoq to models and low base of last year when BS 6 was playing as a dampener. The demand in Q3 was strong on the back of festive period and pent up demand rising post lifting up of lockdown. Input...

Hero MotoCorp's (HMCL) Q3FY21 operating performance beat estimates due to above-expected gross margins.

Our interaction with Hero MotoCorp's (HMCL) management indicated that the structural growth traction in the two-wheeler (2W) industry remains intact. HMCL continues to benefit from premiumisation of its products, its stronghold in the economy and executive motorcycle segments, and aggressive products offerings in premium bike and scooters segments. HMCL is a market leader in the Indian 2W industry, commanding a ~38.5% share. The company commands ~65% market share in the combined economy and executive motorcycle segment, which together makes up 80% of the motorcycle market size in India. HMCL has strong penetration in semi-urban and rural areas, aided by its largest distribution network...

Domestic auto industry volumes have been on a steady mend in the months post lifting of lockdown restrictions. Manufacturing and distribution activities have been getting ramped up gradually since June 2020, in step with the rest of the economy. However, the impact of the pandemic on the supply chain continues to inhibit a complete return to production normalcy. Nevertheless, most automotive industry segments have reported successive improvement in offtake throughout June-November 2020 (Exhibit 1) on the back of (i) initial bounce provided by pent-up aspect,...

Hero MotoCorp is the world's largest 2-wheeler company.