LKP Research has given Buy recommendation for Hero MotoCorp with a target price of Rs. 2826 in its research report issued on May 04, 2022

LKP Research’s research report on Hero MotoCorp

Hero posted robust weak set of numbers in Q4, which were in line with expectations. However we witnessed strong bounce back in gross margins (30.7% vs 29.6% yoy and 29% qoq) which was a very positive sign. Going forward, we expect strong bounce back in Q1 and thereafter as we believe the pandemic is behind us and normalcy has prevailed. Demand levers post pandemic are intact with rural story remaining strong. Also the radical shift to personal mobility from shared mobility is leading the demand. Due to this till now the first time buyers were increasing, but now the replacement demand is also moving up, fuelling the overall demand. Financing has also become easier, which is also a driver for a broad based growth. Also, with a better level of inventory (6-7 weeks), ramping up of production, improving demand, new launches and low base, we expect FY23 to post a solid growth after a weak FY22. HD agreement would provide a fillip to Heros ambitions to win a respectable position in the premium range of motorcycles, although in mid to long term.

Outlook

We therefore maintain our BUY rating on the stock with a target price of Rs2,826. The company has also announced a healthy dividend of Rs95/share (payout ratio of 77%).

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