scorecardresearchHeroMotoCorp Q4: Here's what 4 brokerages have to say on the company's future
Hero MotoCorp. File Photo
Hero MotoCorp. File Photo

HeroMotoCorp Q4: Here's what 4 brokerages have to say on the company's future

Updated: 09 May 2022, 08:01 AM IST
TL;DR.

As per domestic brokerage views, Hero MotoCorp will gradually regain its lost market share in motorcycles over the next 2-3 years, owing to the gradual economic recovery and revival of the rural economy.

India's largest two-wheeler maker, Hero MotoCorp, announced its March quarter results on Tuesday.

The company reported a standalone net profit of 627 crore for the March quarter, down 28% compared with 869 crore in the last year period.

Revenue from Operations too fell 14% to 7,422 as against 8,690 crore in the fourth quarter of FY21.

For the 2021-22 fiscal, the company reported a consolidated PAT of 2,329 crore, down 21 per cent from 2,936 crore in 2020-21.

Hero MotoCorp total sales in the fourth quarter of FY22 stood at 11.9 lakh units, a drop of 24 per cent from 15.68 lakh units in the year-ago period.

The company said its board has recommended a final dividend of 35 per share of face value of 2 each (1,750 per cent). The dividend, if approved at the ensuing AGM, will be paid by September 8, 2022.

In FY23, the company has lined up multiple product launches in different segments with the an to continue building its premium portfolio as well as premiumisation of existing models, which will help deliver growth and profitability, said Niranjan Gupta, CFO of Hero MotoCorp.

Key Financials (Standalone) ( Cr)FY21AFY22PFY23EFY24E
Net sales30,80129,24534,59139,522
EBITDA4,0243,3694,4345,394
Net Profit2,9342,4733,2293,996
EPS (Rs)146.9123.8161.6200.0
ROE(%)18.8115.018.620.9
ROCE (%)18.414.818.320.6
PER (x)19.819.514.912.0
P/BV (x)3.83.12.82.5
EV/EBITDA (x)14.414.210.88.8
Debt/Equity (x)0.00.00.00.0
Source: Axis Research     

Industry overview

With the Russia – Ukraine war continuing and China under lockdown, the global Auto Industry continues to witness a supply crunch as semi-conductor shortage along with high metal prices and container shortage prevails. Customers of the PV segment hence continue to witness long waiting period, said Mr. Vinkesh Gulati, FADA president.

 Two-Wheeler OEM Apr'22Market Share (%), April 22April 2021Market Share (%), April 2021
Hero Motorcorp Ltd4,10,72234.38%2,99,59734.61%
Honda Motorcycle India(P) Ltd2,94,72024.67%2,17,92425.18%
TVS Motor Company Ltd1,80,15915.8%1,28,42614.84%
Bajaj Auto Ltd1,20,38910.08%98,08511.33%
Royal Enfield (Unit of Eicher Ltd)47,0523.94%42,2954.89%
Suzuki Motorcycle India Pvt Ltd44,8073.75%33,7333.90%
India Yamaha Motor Pvt Ltd41,3233.46%34,8364.02%
Source: FADA Research     

The 2W segment, which has witnessed a slight increase in sales when compared to last month, is extremely sensitive to price hikes and continues to remain below pre-covid levels. It is a clear sign that Bharat has not been keeping up with India. Apart from rural distress, multiple price hikes coupled with high fuel prices are keeping price-sensitive entry-level 2W customers away, he said.

What the Future holds?

Axis Securities maintained a 'BUY' rating on the stock and revised its target price to 3,000/share from 3,150/share, implying an upside of 17% from the current market price, and valued Hero MotoCorp at 15x FY24E EPS.

Motilal Oswal raised Hero MotoCorp EPS estimate for FY23/FY24 by 13%/8% to reflect HMCL's price increases and cost-cutting initiatives. The brokerage house maintained its 'BUY' rating with a target price of 3,000/share and valued at 15x March 24 EPS + 168/ share.

Motilal Oswal said that the HMCL's operating performance was affected due to higher other expenses (non-recurring), diluted by stable RM costs and price hikes. Initial green shoots in domestic demand may be seen in the marriage season (Apr-Jun '22) and during mini-festivals, it added.

HDFC Securities, on the other hand, initiated coverage on the stock with a 'BUY' recommendation and a target price (TP) of 2825/share, implying an upside of 10.35% from the current CMP.

According to HDFC Securities, HMCL will gradually regain its lost market share in motorcycles over the next 2-3 years, owing to the gradual economic recovery and revival of the rural economy.

Meanwhile, Prabhudas Lilladher believes HMCL will benefit from the rural recovery, and incremental savings through the leap savings program, leading to margin expansion and success in EV via investment in Ather.

It maintained 'BUY' with a target price of 3,150 /share (at 15x on FY24E standalone EPS, 143 for Hero MotoCorp and 63 for Ather).

An average of 44 analysts polled by MintGenie have a 'buy' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

COVID Pandemic: Automobile production hits multi-year low as pandemic
COVID Pandemic: Automobile production hits multi-year low as pandemic
First Published: 09 May 2022, 08:01 AM IST