Please refer to important disclosures at the end of this report
Hero MotoCorp Limited (HMCL) is a two-wheeler manufacturer. The company
enjoys ~13% market share in scooters (peak share of 20%). With the launch of
the refreshed and BS-IV compliant Duet and MaestroEdge last quarter, HMCL
expects its scooter market share to increase. Management has guided for high
single digit volume growth for the industry and they expect Hero to marginally
outperform in FY18. They have also maintained its long term EBITDA margin
guidance at 14-15% (vs. 16.3% in FY17).It is following dual strategy for EVs
(Electric Vehicle) with (1) investment in Ather Energy and (2) in-house EV
technology. While the company is preparing itself for the eventual shift to EVs, it
believes that India is still some time away from widespread acceptance of EVs.
Exports for Q1FY18 were 42k units (+9% YoY, -18% QoQ).HMCL has started
manufacturing at second global location in Bangladesh during the quarter. All
the initiatives over the past 3-4 years are likely to start bearing fruit soon. The
company has guided for capex of Rs 2500 crore over FY18 and FY19. This will
include investments in Gujarat, first phase of Andhra Pradesh plant as well as
investments in R&D. HMCL has maintained healthy return on equity (ROE) of
35%+ over last 3 Years and has been maintaining a healthy dividend payout of
27.30%. The company has a RoE 33.04% and is trading at a valuation P/E of
22.93x of FY17 TTM earnings. Hence BUY.
CMP `3912
52 Week High / Low
Avg. Daily Volume
BSE Sensex
Face Value (`)
Reuters Code
Vaibhav Agrawal
022 3935 7800 Ext: 6808
[email protected]gelbroking.com
Others | Auto
August 09, 2017
Hero Motocorp Ltd | Auto
June 5, 2017
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement Hero MotoCorp
1. Financial interest of research analyst or Angel or his Associate or his relative No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives No
3. Served as an officer, director or employee of the company covered under Research No
4. Broking relationship with company covered under Research No
Ratings (Based on expected returns Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
over 12 months investment period): Reduce (-5% to -15%) Sell (< -15)