Arihant Capital has given Buy recommendation for Hero Motocorp with a target price of Rs. 2991 in its research report issued on May 04, 2022
Arihant Capital’s research report on Hero Motocorp
Hero MotoCorp (HMCL) has reported revenue slightly above our estimates in Q4FY22, while both EBITDA and PAT are below estimates. Standalone revenue stood at INR 74,217 Mn, against our estimate of INR 73,831 Mn registering a de-growth of 5.9% QoQ/ 14.6% YoY. EBITDA stood at INR 8,276 Mn, against our estimate of INR 9,042 Mn, Registering a de-growth of 13.8%QoQ/31.7%YoY. On the margins front, EBITDA margin contracted by 103bps QoQ/ 279bps YoY to 11.2%, against our estimate of 12.2%. On account of inflationary pressure of commodity costs as well as negative operating leverage. Standalone PAT saw a decrease of 8.6%QoQ/27.5% YoY to INR 6,271Mn against our estimate of INR 6,571 Mn. EPS stood at INR 31.4 in Q4FY22 against INR 38.8 in Q3FY22 (INR 43.3 in Q4FY21).The total volumes (Motorcycles + Scooters) de-grew by 24% YoY/10.2% QoQ to 1,188,884 units. The company realizations grew 12.7% YoY/3.8% QoQ led by improved product mix, price hikes, and higher spare parts revenue. The company EBITDA per Vehicle was decreased by 9.9% YoY/6.3% QoQ of INR 6,961 against 7,723 in Q4FY21.The company has recommended a final dividend of INR 35 per share.
We value Hero MotoCorp at a PE of 18x to its FY24E EPS of INR 166, which yields a revised target price of INR 2,991 (earlier target price; INR 3,738). We maintain our Buy rating on the stock.