Hero MotoCorp Ltd. share price target

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...

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

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...

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.

Hero records highest ever sales, PAT soars Hero MotoCorp (HMCL) 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 eight...

Current tax expense jumped 18.7% year-on-year to Rs 255.27 crore in Q2 September 2020. Volumes grew 7.7% to 18.22 lakh units sold in Q2 FY21 over Q2 FY20. EBITDA jumped 16.80% to Rs 1286 crore in Q2 September 2020 as against Rs 1101 crore in Q2 September 2019....

HMCL is in a sweet spot as strong rural-led recovery plays to its strength in the EconomyExecutive category in the Motorcycles segment. We maintain our BUY rating and TP of Rs. 3,450 and continue to value the stock at 16x its FY23E EPS.