Neutral on Hero MotoCorp at current price: Dipen Shah

In a chat with ET Now, Dipen Shah, Senior Vice President-Private Client Group Research, Kotak Securities, shares his views on Hero MotoCorp.

ET Now: Just one word on Hero MotoCorp’s earnings and the kind of disappointment that they have posted this quarter. Do you sense there could be more by way of weakness for this one?

Dipen Shah: Yes, the stock has come off and the result was disappointing as far as the margins are concerned. The management has given a few reasons about additional R&D spend and additional advertising spends.

If we compare with other companies while TVS and Bajaj have reported either an improvement or a flat margin, Hero MotoCorp has come off, probably it is to do with the higher R&D expenditure with Honda now.

But one thing probably we need to also take note that after the first quarter of next fiscal, the royalty payments will come off or in fact they will no longer be there and that will provide some upsides to the margin from the second quarter onwards.

If we have to look at the volume growth, it has been reporting a better volume growth as compared to others. So as of now we believe we are kind of neutral at the current price on Hero Moto and going ahead.

They are trying to launch few bikes in the Auto Expo. So we just need to see how the volume growth pans out in the next year and that will decide whether Hero MotoCorp is able to outperform Bajaj and TVS.