Hero MotoCorp
Hero MotoCorp share price rose in the early trade on August 16 after the company reported better numbers for the quarter ended June 2022.
Hero MotoCorp had on August 12 reported a 131 percent growth in its consolidated net profit at Rs 590 crore for the first quarter ended June 2022 as against Rs 256 crore recorded a year ago.
On a sequential basis, the profit slipped 3.4 percent from Rs 611 crore earned during the January–March period.
Consolidated revenue rose 54 percent on-year to Rs 8,448 crore as compared to Rs 5,503 crore registered in the year-ago quarter. On a sequential basis, the revenue is higher by 12.7 percent against Rs 7,497 crore recorded in the previous quarter.
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Here is what brokerages have to say about stock and the company post June quarter earnings
Motilal Oswal
We are seeing initial signs of a demand recovery in the domestic 2W industry. This, coupled with stable commodity prices, can drive earnings over the next two-to-three years.
HMCL is largely a pure play on the domestic 2W industry, with its stronghold being the 100cc Motorcycle segment. It has low vulnerability to EVs as it garners just 8% volumes from Scooters. Its core 100cc Motorcycle is less prone to EVs.
We maintain our Buy rating with a Target Price of Rs 3,225.
LKP
Hero posted good set of numbers in Q1, led by strong volume performance. Along with the volumes, maintenance of margins was the highlight of the quarter given the cost pressures.
Going forward, we expect decent volume trajectory with the XTech variants launches in Q1 and new launches coming up. First EV launch in the festive season will further add to the steam.
Demand levers post pandemic are intact with rural story remaining strong on good monsoon. Now that the economy has opened up, normalcy has prevailed and demand is coming back on track.
With a better level of inventory (6-7 weeks), ramping up of production, improving demand, new launches and low base, we expect FY23 to post a double digit growth after a weak FY22.
Profitability would improve on price hikes, cost saving programs like LEAP-2, operating leverage stemming from improving volumes, cooling off in the input costs and product mix. We therefore maintain our BUY rating on the stock with an increased target price of Rs 3,226.
ICICI Securities
Hero MotoCorp’s like its peers has been passing on costs with a lag in a controlled manner to take of demand and optimise margin erosion. With offices and educational institutes opening up gradually, 2W demand is set to pick up with scope of rural market rebounding post remaining subdued for almost a year.
With raw material costs easing off, limited price hikes going ahead should help consumers witness TCO consolidation as against improvement in income and in turn pushing up demand.
In light of the recent stock performance (up ~16%) from the lows post Q4FY22, we downgrade HMCL to ADD from Buy with a DCF-based Target Price of Rs 3,101 (earlier: Rs 3,042), implying 13x FY24E core EPS.
Prabhudas Lilladher
We maintain BUY, as we believe Hero will benefit from (1) rural recovery and festive season demand (2) increasing focus on exports and premiumisation (3) incremental savings through 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.
Our estimates are largely unchanged. Maintain ‘BUY’ with a target price of Rs 3,130 (at 15x on FY24E standalone EPS, Rs 143 for Fincorp and Rs 63 for Ather).
At 09:20 hrs Hero MotoCorp was quoting at Rs 2793.65, up Rs 32.75, or 1.19 percent on the BSE.
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