scorecardresearchHero MotoCorp shares rise after Q1; brokerages upbeat on the two-wheeler

Hero MotoCorp shares rise after Q1; brokerages upbeat on the two-wheeler maker

Updated: 16 Aug 2022, 04:44 PM IST
TL;DR.

Hero MotoCorp is gearing up to launch an electric vehicle in the festive season and has forged several partnerships and collaborations on this front including charging infrastructure.

EBITDA for the quarter under review stood at  <span class='webrupee'>₹</span>941 crore versus  <span class='webrupee'>₹</span>515 crore in Q1FY22, reflecting an 11.2% EBITDA margin and a growth of 83%.

EBITDA for the quarter under review stood at 941 crore versus 515 crore in Q1FY22, reflecting an 11.2% EBITDA margin and a growth of 83%.

Shares of Hero MotoCorp rose 3% in intraday trade on BSE on August 16 as investors bought shares of the two-wheeler maker taking a cue from its June quarter earnings. The stock finally closed 2.02% higher at 2,816.60.

The company on August 12 posted a 71% jump in its standalone net profit at 624.52 crore for Q1FY23 against 365 crore in the corresponding quarter of the last financial year. Revenues from operations in Q1FY23 jumped 53% to 8,392.54 crore from 5,487 crore last year.

EBITDA for the quarter under review stood at 941 crore versus 515 crore in Q1FY22, reflecting an 11.2% EBITDA margin and a growth of 83%.

“The fiscal year began on a positive note for the industry, with growth over not only last year but sequentially over Q4FY22 as well. As the country enters the festive season, we expect the two-wheeler demand to be on a healthy trajectory supported by micro factors like a normal monsoon, crop cycle, the opening of all sectors of the economy, etc. The margin pressure on the industry is also likely to ease in coming quarters, as commodities cool off and price recovery moves ahead of cost impact," said Niranjan Gupta, Chief Financial Officer (CFO), Hero MotoCorp.

As per the company's BSE filing, it is gearing up to launch an electric vehicle in the festive season and has forged several partnerships and collaborations on this front including charging infrastructure.

Brokerages upbeat

Brokerage firm Emkay Global maintained a buy call on the stock with a target price of 3,470 even as it reduced its FY23 and FY24 earnings per share (EPS) by 8% and 1%, respectively, factoring in lower gross margin and other income.

Emkay expects a 13% volume CAGR in the domestic market over FY22-24E, supported by the reopening of offices/educational institutions, pick-up in rural sales, better finance availability, and a favourable base effect. FY24E volume estimate would still be 22% below the peak witnessed in FY19, Emkay said.

Brokerage firm JM Financial also maintained a buy call on the stock with a target price of 3,200 as it expects Hero MotoCorp to draw support from improving consumer spending, leading to a 14% volume CAGR over FY22-24E.

"We estimate standalone EPS to post nearly 32% CAGR over FY22-24E," said JM Financial.

Brokerage firm Nirmal Bang has a buy call on the stock with a target price of 3,364. Nirmal Bang said although Hero MotoCorp is a late entrant in the EV market, it is positive about the company’s prospects in EVs going ahead, backed by its cost competitiveness owing to its ability to scale up production, robust technological capabilities and extensive market reach.

Hero Moto will also launch its own battery swapping model in FY23.

"We see Hero Moto’s strategy on EVs well-hedged, with a presence across various spectrums of EV technologies. We expect it to be among the front runners in the EV transition. We remain constructive on Hero Moto and have tweaked our FY23E/FY24E EBITDA by (0.2%)/2.2%. We value the stock at 15 times (marginal discount to 10-year average) June’24E EPS and add 98/ 200 per share for Hero Fincorp and Ather to arrive at a target price of 3,364 and maintain a buy rating," said Nirmal Bang.

Prabhudas Lilladher also has a buy call on the stock with a target price of 3,130. The brokerage firm believes Hero MotoCorp will benefit from several factors, including (1) rural recovery and festive season demand, (2) increasing focus on exports and premiumisation, (3) incremental savings through the Leap savings program leading to margin expansion, and (4) success in EV via investment in Ather, in-house mass product (Vida) and JV with Gogoro.

According to a MintGenie poll, an average of 44 analysts have a ‘buy’ call on the stock.

Disclaimer: The views and recommendations are those of individual analysts or broking firms and not of MintGenie.

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First Published: 16 Aug 2022, 02:48 PM IST