Upgrade Hero Honda to 'Buy' with target of Rs 2088: BofA ML

MUMBAI: Bank of America Merrill Lynch has upgraded Hero Honda to ‘ Buy’ following the announcement of end of joint venture between Hero Group and Honda Motors.

“Honda’s exit from JV has allayed investor concerns over a possible hike in royalty rates. Following the 16% stock underperformance this fiscal year, we upgrade our rating to Buy and raise PO to Rs 2088 (from Rs 1,965).

Our PO of Rs 2088 is based on sum of parts of (1) core two wheeler business valued at 15x FY12E P/E or Rs 1706/share, up from earlier 14x on reduced overhang and increased visibility, and (2) cash & equivalents of Rs 382/share. At our PO, stock would trade at 16.3x FY12E P/E.,” the report said.