Hero Motocorp’s (HMCL) Q1FY18 number to a great extent, meet the consensus estimates. Net sales were at Rs7,972cr, up 7.7% yoy. EBITDA was at Rs1,296cr up 5.4% yoy and PAT was at Rs914cr, up 3.5% yoy. Consensus estimates of revenue, EBITDA and PAT were Rs8,053cr, Rs1,280cr and Rs912cr. HMCL’s performance looks better than quarterly performance of Bajaj Auto’s with margins maintained and growth in revenue and PAT.
Company expects to aggressively gain market share to consolidate its position. We expect CAGR of ~14%/11% in the sales/PAT over next two years. The company expects ~100bps decline in margins due to the expiry of excise benefits at Haridwar plant. The stock, at CMP, trades at 18x of FY19E earnings. We value the stock at 20x of FY19E earrings due to slightly better growth outlook. We derive price target of Rs 4,130 with accumulate rating.

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