Hero Motorcorp - Maintain Estimates

BSE Index Analysis, Securties , Standard Experts 

Hero Motorcorp : 

Q4 In Line; Maintain Estimates

Reco : Hold    

Cmp : 2,088    

Target : 2,169

Hero Motocorp (HMCL) Q4 operating performance was in line with our estimate. Despite 40 bps increase in RMC, EBITDA margin improved 20 bps to 12% (adj. for royalty of Rs 2 bn) due to lower employee costs and other expenses. 

Management is confident of achieving 6.8 mn units in FY13 (in line with our estimate) with favorable input costs. Maintain estimates for FY13 and FY14. We have a HOLD rating on the stock with TP of Rs 2,169 (13x FY14E core EPS of Rs 140 + Rs 354 of cash/ share).

Key highlights
Revenue up 12% YoY at Rs 60 bn, EBITDA at Rs 7.3 bn (up 11% YoY), and PAT at Rs 6 bn (up 20% YoY). Reported Margin (assuming payment to Honda as amortization) was 15.3%.

Re-branding: 

Management indicated that re-branding of both its key products Splendor and passion (from Hero Honda to Hero from April) has been well received (most of the Splendors and Passions sold in April were branded as Hero).