Hero MotoCorp Ltd. share price target

FY2020 was a challenging year for the two-wheeler (2W) industry, with volumes dropping by 18% y-o-y, impacted by increased cost of ownership, NBFC liquidity crisis, and lack of income growth. While the industry is facing short-term challenges on account of COVID-19, long-term growth factors are intact. Moreover, Hero MotoCorp (Hero) expects industry demand to recover as early as H2FY2021, driven by buoyancy in rural sentiments, pent-up demand, and preference for personal transport to ensure safety in post-COVID era. Hero's focus on...

Hero MotoCorp (HMCL) Q4FY20 EBITDA margin was lower than our and consensus estimates. EBITDA margin for the quarter stood at 10.6% vs our and consensus estimates of 12.2% and 11.6% respectively due to one-offs. We expect 2W industry to see a double digit decline in FY21 primarily driven by adverse impact of the COVID-19 outbreak on economic growth and discretionary spending. The challenges for the 2W segment are likely to get aggravated as consumer spending will be severely impacted by the outbreak resulting in lower spending power both in urban and rural markets. We believe HMCL being a major player in commuter segment could see muted sales. We...

Revenue from operations during the quarter under review stood at Rs 6,333.51 crore as against Rs 7953.10 crore in the same quarter a year ago. The company said it sold 1,323,000 twowheeler units during the quarter. OPM of the company stood at 10.63% compared to 13.97% in Q4FY19. As a result operating profits reported profit of Rs 673.25 crore compared to profit of Rs 1110.84 crore. Other income fell 19% to Rs 157.03 crore. Interest cost down by 11% to Rs 10.13 crore. Depreciation rose...

Hero MotoCorp reported weak performance during Q4FY20 with a 20.9% YoY fall in revenue to Rs 62,384 mn was impacted due to disruptions caused by covid-19 in late March. It had reported a revenue of Rs 78,850 mn in the corresponding quarter last year. Profit of the company declined by 15% YoY to Rs6207 mn in Q4FY20 while on a sequential basis profit fell by 29.50%.EBITDA stood at Rs 6599mn down by 38.3% YoY for the Q4FY20 as compared to Rs 10,693 mn for the Q4Y19. EBITDA margin narrowed to 10.6% in Q4FY20 as compared to 13.6% in Q4FY19. The two-wheeler major...

Demand to improve gradually, bracing for a stronger FY22 Margins impacted by one offs, otherwise numbers in line with expectations Topline de-grew by 20.9% yoy as volumes saw 25.7% yoy fall, while realizations grew by 5% on...

Hero MotoCorp reported weak performance during Q4FY20 with a 20.9% YoY fall in revenue to Rs 62,384 mn was impacted due to disruptions caused by covid-19 in late March. It had reported a revenue of Rs 78,850 mn in the corresponding quarter last year. Profit of the company declined by 15% YoY to Rs6207 mn in Q4FY20 while on a sequential basis profit fell by 29.50%.EBITDA stood at Rs 6599mn down by 38.3% YoY for the Q4FY20 as compared to Rs 10,693 mn for the Q4Y19. EBITDA margin narrowed to 10.6% in Q4FY20 as compared to 13.6% in Q4FY19. The two-wheeler major...

High rural slate to help consolidate market share HMCL is the market leader in the domestic motorcycle space, commanding ~52% market share, as of FY20. We expect the motorcycle sub segment to be among the frontrunners of post Covid recovery on account of (1) higher share of sub segment sales in rural economy, which has been less exposed to the pandemic outbreak and currently holds more stable income prospects courtesy remunerative Rabi crop prices and expectations of a normal monsoon and (2) increasing preference for private transport amid...

Hero MotoCorp (HMCL) posted an operationally weak Q4FY20 performance led by poor gross margins and one-off dealer support via discounts.

10 June 2020 HMCL posted a weak operating performance (even on an adjusted basis) due to weak volumes and one-off costs. Near-term margins would remain under pressure due to BS6-related impact, a possible adverse mix, and op. We marginally downgrade our EPS, but maintain our Neutral rating, with TP of ~INR2,350 (~15x Mar22 EPS+INR97/share for Hero FinCorp). HMCLs revenues/EBITDA/PAT declined 21%/38%/15% YoY in 4QFY20, and 14%/19.7%/10% in FY20. Revenues declined ~21% YoY to ~INR62.4b on ~25% YoY decline (-13% QoQ) in volumes. Realizations increased 5.6% YoY (+2.9% QoQ) to INR46.7k, despite BS4 discounts (INR1.1b), driven by BS6-related price increases. incentives (~80bp), and c) obsolete BS4 inventory. Also, impact from passing BS6 cost was reported, without the loading of contribution margins.

Target saving of ~100bp in FY21 from LEAP 2 program (v/s 60bp in FY20). HMCL's Q4FY20 performance was in-line with revenue/EBITDA/PBT while margins came in lower at 10.6% (-300bps YoY, PLe 11.4%) led by contraction in gross margins, negative operating leverage and higher dealer support to...