We believe that HMCL volumes are expected to see
further growth this year owing to the improved consumer sentiment. HMCL is
expected to emerge as a strong beneficiary of the recovery in the rural economy
as it has a strong presence in the rural region. Company holds more than 50%
market share in the overall 2W industry which will also benefit the company
further. Company indicated some cost pressure going ahead as commodity prices
have started to move up. However, overall profitability is expected to increase
over higher sales volumes. We have estimated double digit volume growth
(~10%) in remainder of FY2017E and in FY2018E. We also forecast slightly
higher RM costs in our model to accommodate higher input costs. The stock is
currently valued at15.9x of FY2018E EPS. We value stock at 17.0x of its FY2018E
EPS considering current momentum of growth and earnings. We rate HMCL as
“Accumulate” with a price target of Rs3,541 implying 7% upside.

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