Buy Hero MotoCorp, target price Rs 3069: HDFC Securities

HDFC Securities has buy call on Hero MotoCorp with a target price of Rs 3069. The current market price of Hero MotoCorp Ltd. is Rs 2758.55. Time period given by analyst is six months when Hero MotoCorp Ltd. price can reach defined target.

Hero MotoCorp Ltd., incorporated in the year 1984, is a Large Cap company (having a market cap of Rs 55100.14 Crore) operating in Auto sector.

Hero MotoCorp Ltd. key Products/Revenue Segments include Motorised Two Wheelers Upto 350cc Engine Capacity, Spares (Two Wheelers), Other Operating Revenue, Sale of services and Duty Drawback for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 7627.99 Crore, down -6.21 % from last quarter Total Income of Rs 8133.30 Crore and down -12.90 % from last year same quarter Total Income of Rs 8758.01 Crore. Company reported net profit after tax of Rs 640.87 Crore in latest quarter.

Investment Rationale
The brokerage expects HMC’s Revenue/EBITDA/PAT to grow at 16/25/25% CAGR over FY22-FY24E, led by market share revival in domestic motorcycles and ramp-up in exports. The company’s aggressive plans in scooters, premium bikes, and EV segments are likely to augur well for medium-term growth. Though the recent results of HMC have not been encouraging, the brokerage thinks the worst is behind and the current low valuation offers margin of safety despite the uncertainty caused by the popularity of EV bikes. A healthy dividend yield of 3.4% is an added positive. It believes investors can buy the stock on dips in the band of Rs 2600-2640 and add further on dips to Rs 2360-2400 band (12.25x FY24E EPS) for a base case fair value of Rs 2875 (14.75x FY24E EPS) and bull case fair value of Rs 3069 (15.75x FY24E EPS) over the next 2 quarters.

Promoter/FII Holdings
Promoters held 34.75 per cent stake in the company as of 31-Mar-2022, while FIIs owned 43.02 per cent, DIIs 10.44 per cent.