Hero MotoCorp Ltd. share price target

On the Path of Recovery Maintain BUY: During Q2FY20, HMCL s sales declined by 16.7 percent YoY to Rs 75.7Bn (our Estimates Rs 73.5Bn).

Hero MotoCorp reported 36% rise in its consolidated profit after tax to Rs 1256.69 crore for the first quarter ended June 2019. The company had posted a PAT of Rs 924.74 crore for the same period previous fiscal. Total income from operations for the quarter under review stood at Rs 8185.66 crore as against Rs 8,912.98 crore in the same period last fiscal, lower by 8%. The increase in June quarter profit was on account of one-time gain with respect to reversal of a calamity fund. Else, at the PBT before EO level, the company registered 16% drop in profits. Bottomline was also boosted by big rise in other income. Performance was weighed...

During Q1FY20, HMCLs sales declined by 8.8% YoY to Rs80.3bn (our Estimates Rs83.9bn). Its EBITDA margins contracted by 121bps YoY to 14.4% (Our estimates 13.9%). PAT declined by 16.1% YoY to Rs7.6bn which was 6% below our estimates.

Maintain BUY as (1) Hero has successfully defended market share in the 2W segment in the current downturn. (2) The premium launches will further enhance its addressable customer base. The market share shift away from scooters will benefit given its motorbike dominant portfolio. (3) The stock is trading at attractive valuations of 13.7x on FY20E estimates and offers a dividend yield of ~3.9%. The co has healthy return ratios with an ROE of 24%. 1QFY20 operating performance was a beat as margins at 14.4% were up +90bps QoQ on improved cost management. Amidst an uncertain environment, Hero is addressing white spaces in its portfolio and upgrading its existing products. Re-iterate BUY, with a TP of Rs 2,875 (16x FY21 EPS).

Hero MotoCorp (HMCL) Q1FY20 EBITDA margin was higher than our and consensus estimates. EBITDA margin for the quarter stood at 14.4% vs our and consensus estimates of 13.4% and 14.1% respectively. We expect weaker consumer sentiment, higher inventory, competitive intensity and tight liquidity conditions to put pressure on HMCL's volume growth. We factor slowdown in H1FY20 and cut our FY20/21 volume estimates by 8% each. We cut our revenue/earnings estimates by 9%/6% and 10%/12% for FY20/FY21...

Near term headwinds to limit volume growth in FY19-21E! Domestic 2-W industry has benefitted from increasing farm income, urbanisation and rising participation of women in workforce with volumes growing at a CAGR of 7.4% in FY13-19. It was largely led by growing scooter category (15% CAGR in the aforesaid period). However, with scooters now reaching multiple penetration saturation in urban India and muted farm income amid healthy ~40%+ penetration of 2-W domestically, we expect growth of the 2-W industry to taper. In the near term, with elevated inventory...

monitorables. Sustenance of market share will remain key to growth. Management is hopeful of improved retails in the upcoming festive season as well as pre-buy ahead of BSVI. The industry continues to lobby for lower GST rates on 2Ws to aid demand. As Hero has rolled out new...

For Q1FY2020, Hero MotoCorp Limited's (Hero) performance came inline with our expectations. The 2W industry's wholesales declined by 12% in Q1FY2020. While the industry's retails dropped by 6%, Inventory correction by OEM led to a sharper drop in wholesales. Industry inventory continues to remain high at six weeks, which along with weak consumer sentiments would continue to impact demand. We expect the 2W industry to drop in FY2020. Margin contraction due to operating deleverage and increased depreciation charges on account of scrapping of old BS4 machinery would lead to double-digit earnings drop for Hero in FY2020....

Hero Motocorp's Q1FY20 performance was in-line, with EBITDA margins at Change in Estimates | Target | Reco 14.4%, lower 120bps YoY but up 80bps QoQ. The sustenance of margins at current levels to continue led by commodity tailwinds in coming quarters....

Attractive Valuation to Own Strong Company; Upgrade to BUY Hero MotoCorp (HMCL) has delivered better-than-expected performance in 1QFY20 with its operating margin coming in at 14.4% vs. our estimate of 13.6%, declined by 121bps YoY (+86bps QoQ). Its revenue fell by 9% YoY (+2% QoQ) to Rs80.3bn (vs. our estimate Rs81.7bn), while EBIDTA decreased by 16% YoY (+8% QoQ) to Rs11.6bn due to higher other expenses. EBIDTA margin contracted by 121bps YoY on account of limited ability to pass on higher input cost amid intensified competition. Its ASP improved by 4% YoY due to price hike for implementation of safety norms. HMCL's adjusted PAT declined by 14% YoY (+8% QoQ) to Rs7.86bn surpassing...