Buy Hero MotoCorp, target price Rs 2,110: Nirmal Bang
The buy rating on Hero MotoCorp has been retained courtesy its healthy B/S and dividend payout (50 per cent+).
By ETMarkets.com | Updated:
ThinkStock Photos
Nirmal Bang has given a buy rating to Hero MotoCorp with a target price of Rs 2,110 (a potential upside of 21 per cent over CMP of Rs 1,750.
The two-wheeler segment is likely to be most affected by the issue of unsold BS-IV inventory as Covid-19 spread and preventive measures to tackle it forced closure of dealerships in most parts of the country. Industry sources estimate ~5-7 lakh units of BS-IV stock lying with dealers at present.
Market leader Hero MotoCorp has appealed to the Supreme Court to allow registration of BS-IV vehicles citing the unprecedented and unforeseen nature of present circumstances.
The company’s share price moved up by 3.19 per cent from its previous close of Rs 1553.50. The last traded price is Rs 1,603. Incorporated in 1984, Hero MotoCorp has a market cap of Rs 30995.56 crore.
Investment Rationale
The two-wheeler major has halted production at all global facilities (India, Bangladesh, Colombia) until March 31. It has broadly underperformed its peers in 11MFY20 owing to limited presence in exports and weakness in scooters and entry level motorcycle segments. However, a dominant slant towards domestic business is now expected to work to its advantage in the short-term as both demand and supply legs take a hit globally.
Financials
For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 7074.53 crore, down -7.65 per cent from last quarter sales of Rs 7660.27 crore and down -10.87 per cent from last year same quarter sales of Rs 7936.88 crore. The company reported net profit after tax of Rs 880.13 crore in the latest quarter.
The two-wheeler segment is likely to be most affected by the issue of unsold BS-IV inventory as Covid-19 spread and preventive measures to tackle it forced closure of dealerships in most parts of the country. Industry sources estimate ~5-7 lakh units of BS-IV stock lying with dealers at present.
Market leader Hero MotoCorp has appealed to the Supreme Court to allow registration of BS-IV vehicles citing the unprecedented and unforeseen nature of present circumstances.
The company’s share price moved up by 3.19 per cent from its previous close of Rs 1553.50. The last traded price is Rs 1,603. Incorporated in 1984, Hero MotoCorp has a market cap of Rs 30995.56 crore.
Investment Rationale
The two-wheeler major has halted production at all global facilities (India, Bangladesh, Colombia) until March 31. It has broadly underperformed its peers in 11MFY20 owing to limited presence in exports and weakness in scooters and entry level motorcycle segments. However, a dominant slant towards domestic business is now expected to work to its advantage in the short-term as both demand and supply legs take a hit globally.
ADVERTISEMENT
For HMCL, the brokerage has built in -17 per cent, -8 per cent, 10 per cent YoY volume trajectory over FY20E, FY21E, FY22E, respectively. The buy rating on Hero MotoCorp has been retained courtesy its healthy B/S and dividend payout (50 per cent+). The CFO yield is more than 10 per cent, FCF yield over 5 per cent and it has an attractive dividend yield of ~5 per cent. The company is valued at Rs 2,110 i.e. 13 times P/E on FY22E EPS of Rs 162/share.Financials
For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 7074.53 crore, down -7.65 per cent from last quarter sales of Rs 7660.27 crore and down -10.87 per cent from last year same quarter sales of Rs 7936.88 crore. The company reported net profit after tax of Rs 880.13 crore in the latest quarter.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
