hero motocorp (herhon)
TRANSCRIPT
ICIC
I S
ecurit
ies –
Retail E
quit
y R
esearch
Result
Update
August 14, 2020
CMP: | 2,800 Target: | 3,235 (16%) Target Period: 12 months
Hero MotoCorp (HERHON)
BUY
Outsized beneficiary of post Covid world…
Hero MotoCorp (HMCL) reported strong Q1FY21 results. Total 2-W sales
volume for the quarter came in at 5.6 lakh units, down 69.4% YoY.
Consequent net sales were at | 2,972 crore, down 63% YoY, tracking
~12.8% sequential rise in blended ASPs to | 52,741/unit. EBITDA in Q1FY21
was at | 108 crore, down 90.7% YoY with corresponding EBITDA margins
at 3.6%. Margin performance was encouraging considering mere 25%
capacity utilisation during the quarter. HMCL said that ex-fixed costs
incurred during lockdown, margins were at 12% levels. Consequent PAT
came in at | 61.3 crore for the quarter.
Healthy demand traction leads to market share gains
HMCL continues to lead the way for the 2-W industry in the post-Covid
months, reflected in substantial market share gains (up 500 bps YoY as of
July). Retail volumes for July were down 28% vs. pre-Covid levels and 29%
YoY against overall industry’s 33% and 38% decline, respectively. We
remain confident that HMCL, the motorcycle segment market leader will be
an outsized beneficiary of its presence on the (1) rural/semi-urban side and
(2) entry level offerings. Demand traction remains strong in rural
geographies courtesy healthy sentiment and cash levels on the back of
normal monsoon progress, remunerative Rabi crop, sharp YoY jump in
Kharif sowing, continued government focus on farm incomes and lesser
incidence of the pandemic. The shift towards personal mobility as a form of
social distancing is also helping (HMCL estimated 10-12% demand
preponing on this count) and would act as a further tailwind. We build flattish
volume CAGR in FY20-22E on a conservative basis.
Strong financials, B/S strength offer additional comfort
The company has over the years exhibited strong financial discipline. With
a debt free B/S and large cash reserves on books (~| 6,500 crore as of FY20,
~11.5% of market cap), it has a track record of healthy dividend payment
(~50% payout ratio over the years, present yield ~3%). Moreover, the
company has also been a consistent cash generator (positive CFO and FCF
in each of the last 10 years; present CFO, FCF yield at ~7%, ~5%
respectively). The company also generated ~ | 1,000 crore cash in Covid-
impacted Q1FY21. Amid focus on cost items, expected improvement in
margin profile is also seen leading to upturn in return ratios in coming years.
Valuation & Outlook
For HMCL we build 8.3% sales CAGR, flattish volume CAGR in FY20-22E.
HMCL’s dominant presence in rural geographies (~50% of sales) and market
leadership in domestic motorcycle segment places in a sweet spot to
capture post Covid consumer trends, in our view. Hence, we upgrade it to
BUY, valuing the company at | 3,235 (20x P/E on FY22E EPS of | 161.8). We
believe market share gains, positive demand outlook and strong financials
merit higher multiples than peers.
K e y F ina ncia ls F Y18 F Y19 F Y20 F Y21E F Y22E C AG R (F Y20-22E)
Net S ales 32,230.5 33,650.5 28,836.1 28,215.0 33,829.9 8.3%
E B ITD A 5,280.2 4,929.8 3,958.0 3,225.1 4,404.1 5.5%
E B ITD A Margins (% ) 16.4 14.6 13.7 11.4 13.0
Net P rofit 3,697.4 3,384.6 3,633.3 2,357.2 3,231.1 -5.7%
Normalised Net P rofit 3,697.4 3,384.6 3,202.6 2,357.2 3,231.1 0.4%
E P S (₹) 185.1 169.5 181.9 118.0 161.8
P /E 15.1 16.5 15.4 23.7 17.3
R oNW (% ) 31.4 26.3 22.7 15.4 19.1
R oC E (% ) 38.1 32.0 21.2 15.3 20.2
Key Financial Summary
Source: ICICI Direct Research, Company
Particulars
P a rticu la r Am oun t
Market C apita liz ation ₹ 55916 C rore
Total D ebt (F Y 20) ₹ 150 C rore
C ash & Inv. (F Y 20) ₹ 6485 C rore
E V (F Y 20) ₹ 49581 C rore
52 week H /L (₹) 3021 / 1475
E quity capita l (₹ crore) 39.9
F ace value ₹ 2
Price chart
02,0004,0006,0008,00010,00012,00014,000
500
1500
2500
3500
4500
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
HMCL (LHS) Nifty (RHS)
Key Highlights
Total 2-W sales volume in Q1FY21
at 5.6 lakh units, down 69.4% YoY.
Blended ASPs rose 12.8% QoQ
Margins at 3.6%, with normalised
margins at 12% as per management
HMCL remains in a sweet spot by
being a dominant player on the rural
side while also being a beneficiary
of move towards affordable
personal mobility post Covid.
Strong financial discipline, cash
generation and dividend payment
record are structural positives
Upgrade from HOLD to BUY with
revised target price of | 3,235 i.e.
20x P/E on FY22E EPS
Research Analyst
Shashank Kanodia, CFA
Jaimin Desai
ICICI Securities | Retail Research 2
ICICI Direct Research
Result Update | Hero MotoCorp
Exhibit 1: Variance Analysis
Q1FY21 Q1FY21E Q1FY20 YoY (%) Q4FY20 QoQ (%) Comments
Total Operating Income 2,972 2,792 8,030 -63.0 6,238 -52.4 Topline came in ahead of estimates tracking beat on the
Raw Material Expenses 2,094 1,939 5,592 -62.6 4,320 -51.5
Employee Expenses 382 419 468 -18.2 435 -12.2Employee expenses were well contained and were down
18% YoY and 12% QoQ to | 382 crore
Other expenses 387 419 813 -52.4 823 -53.0
Operating Profit (EBITDA) 108 15 1,158 -90.7 660 -83.6EBITDA came in ahead of estimates tracking beat on
APS's and better cost control at Hero MotoCorp
EBITDA Margins (%) 3.6 0.5 14.4 -1387 bps 10.6 -1010 bps
Other Income 148 189 219 -32.2 169 -12.4 Other income was a tad lower than our estimates
Interest 6.3 4.6 4.4 43.2 4.1 54.2
Depreciation 170.8 210.1 236.1 -27.7 174.7 -2.3 Depreciation witnessed a marginal sequential decline
PBT after Exceptional Items 79.5 -10.1 1,136.4 -93.0 650.6 -87.8
Total Tax 18.2 -2.5 616.5 -97.1 29.9 -39.2 Tax rate came in marginally lower at 23%
PAT 61.3 -7.6 1,257.3 -95.1 620.7 -90.1
EPS (Adjusted) 3.1 -0.4 39.4 -92.2 31.1 -90.1PAT for the quarter came in ahead of estimates tracking
better than anticipated margin trajectory
Key Metrics
Motorcycle volumes ('000s) 530.0 530.0 1,727.8 -69.3 1,279.6 -58.6
Scooter volumes ('000s) 33.4 33.4 115.2 -71.0 54.9 -39.1 Total volumes for the quarter stood at 5.63 lakh units
Net Blended ASP (|/unit) 52,741 49,551 43,573 21.0 46,747 12.8Blended ASPs increased ~13% QoQ to | 52.7k/unit,
largely due to BS-VI transition
Source: Company, ICICI Direct Research
Exhibit 2: Change in estimates
(| Crore) Old New % Change Old New % Change Comments
Revenue 27,692 28,215 1.9 32,104 33,830 5.4Marginally revised upward our sales estimates for FY21-22E. We
expect net sales to grow at a CAGR of 8.3% over FY20-22E
EBITDA 2,963 3,225 8.8 4,008 4,404 9.9
EBITDA Margin (%) 10.7 11.4 73 bps 12.5 13.0 52 bpsMarginally revised upward our margin estimates tracking upbeat
management commentary on cost saving initiatives
PAT 2,193 2,357 7.5 2,948 3,231 9.6
EPS (|) 109.8 118.0 7.5 147.6 161.8 9.6Upward revision in sales as well as margin estimates leads to
healthy high single digit increase in PAT estimates going forward
FY21E FY22E
Source: Company, ICICI Direct Research
Exhibit 3: Assumptions
Comments
FY19 FY20 FY21E FY22E FY21E FY22E
Motorcycle volumes (lakh
units)
71 60 50 60 51 58
Scooter volumes (lakh units) 7 4 4 5 4 5
Total volumes (lakh units) 78 64 54 64 55 63
Growth (%, YoY) -18% -15% 18%
Gross Blended ASP (|/unit) 43,026 44,988 51,795 52,478 50,253 50,827Revise upward our ASPs estimates for FY21-22E tracking the
beat in Q1FY21 amid successful BS-VI transition
The 2-W sales volume is seen declining 15% YoY in FY21E amid
Covid-19 led disruption with decline lower than competition due
to high rural share of sales and upbeat refreshed product slate.
Volumes are seen recovering in FY22E, with volume growth
anticipated at 18.3% YoY. On aggregate basis, volumes are seen
growing at 0.3% CAGR over FY20-22E
EarlierCurrent
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 3
ICICI Direct Research
Result Update | Hero MotoCorp
Conference Call Highlights
Management guidance/outlook and demand
HMCL believes that continuance of positive demand momentum into
July and August points to the recovery being more organic rather than
just comprising of pent up demand. Personal mobility trend is also
aiding demand, with 10-12% purchase preponing happening on account
of this preference. HMCL believes that India continues to be an
underpenetrated market for 2-Ws. Rural and semi urban geographies are
witnessing greater traction than urban markets
HMCL’s market share improved 500 bps YoY during Q1FY21 and was
maintained at that level during July 2020
Rural fundamentals remain robust. The company witnessed V-shaped
recovery in demand in these geographies post lockdown, with pent up
demand having been serviced already. Urban sentiment, on the other
hand, is more subdued, and the company expects it to revive closer to
the festive period
The recovery is being led by Central zone (Rajasthan, Madhya Pradesh,
Uttar Pradesh), Bihar (excluding local lockdown) and the eastern states.
Demand is moderate in the south while Maharashtra and Gujarat are
relative laggards
Scooter volumes are expected to revive in tandem with urban uptick.
Some models, however, are showing promising signs. For instance,
Pleasure reach has expanded on pan-India basis now (14 states forming
75% of volumes now vs. 6 states forming equivalent volumes last year)
while Destni recorded 30% sequential growth in July
Localised lockdowns are impacting production & supply chain
sporadically, however sufficient demand exists. On overall basis,
demand is outpacing supply
In terms of customer profile, the share of first time and additional buyers
has increased at the expense of replacement buyers
The company wants to move to double digit market share in the
premium motorcycle segment
Revenues, costs and margins
Q1FY21 saw spares revenues of | 293 crore and other operating income
of | 67 crore
Fixed costs incurred during lockdown were ~| 250 crore. Excluding
their impact, EBITDA margins for the quarter stood at 12%. The
management believes that margins are sustainable around this mark
ASPs are largely sustainable at present level
HMCL took some price hikes in July on HF Deluxe, some other models
BS-VI costs have been passed on to customers on an absolute basis
HMCL is focusing on all cost line items and on productivity improvement
R&D spends in FY20 amounted to ~| 700 crore, up 35% YoY
Import content forms <10% of material consumption
Others
HMCL said that BS-IV to BS-VI price delta under e-carburettor is the
same as in fuel injection (FI) technology. Additionally, FI is adaptable to
forthcoming OBD-II regulations and is an accepted technology globally.
Moreover, the Indian ecosystem is more geared towards FI as e-
carburettor makes up ~10% of industry
The company generated ~| 1,000 crore cash during the quarter
Most of HMCL’s top 20 markets are rural and semi urban
The company would build up some inventory in August and September
in preparation for the festive period
HMCL’s unregistered BS-IV vehicles were ~25-30,000 units
ICICI Securities | Retail Research 4
ICICI Direct Research
Result Update | Hero MotoCorp
Financial story in charts
Exhibit 4: Growth in revenues
28
,44
3
28
,47
5
32
,23
0
33
,65
1
28
,83
6
28
,21
5
33
,83
0
12.5
0.1
13.2
4.4
(14.3)
(2.2)
19.9
(20)
(15)
(10)
(5)
-
5
10
15
20
25
25000
26000
27000
28000
29000
30000
31000
32000
33000
34000
35000
FY16 FY17 FY18 FY19 FY20 FY21E FY22E
(%)
(₹ c
rore
)
Net Sales Growth
Source: Company, ICICI Direct Research
Exhibit 5: Margins trend
4,4
55
4,6
35
5,2
80
4,9
30
3,9
58
3,2
25
4,4
04
15.7 16.3 16.4
14.6 13.7
11.4
13.0
-
2
4
6
8
10
12
14
16
18
0
1000
2000
3000
4000
5000
6000
FY15 FY16 FY18 FY19 FY20 FY21E FY22E
(%)
(₹ c
rore
)
EBITDA EBITDA Margins (%)
Source: Company, ICICI Direct Research
Exhibit 6: Trend in profitability
3,1
60
3,3
77
3,6
97
3,3
85
3,6
33
2,3
57
3,2
31
32.5
6.9 9.5
(8.5)
7.3
(35.1)
37.1
(40)
(30)
(20)
(10)
-
10
20
30
40
50
0
500
1000
1500
2000
2500
3000
3500
4000
FY16 FY17 FY18 FY19 FY20 FY21E FY22E
(%)
(₹ c
rore
)
PAT Growth
Source: Company, ICICI Direct Research
HMCL’s revenues are expected to register CAGR of
8.3 over FY20-22E despite flattish volume CAGR
largely due to increase in ASPs under BS-VI.
EBITDA margins expected to remain under pressure
amid limited operating leverage benefits in FY21E.
We factor in recovery towards 13% levels by FY22E
on the back of cost actions and volume support
We expect HMCL to clock flattish CAGR in
normalised PAT over FY20-22E -21E to | 3,231 crore
ICICI Securities | Retail Research 5
ICICI Direct Research
Result Update | Hero MotoCorp
Exhibit 7: Dividend payout trend
60
72
85
95
87
90
60
80
50.2
45.5
50.3
51.3 51.3
49.5
50.8
49.4
42
43
44
45
46
47
48
49
50
51
52
30
50
70
90
110
FY14 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
%(₹)
DPS Dividend Payout
`
Source: Company, ICICI Direct Research
Exhibit 8: Cash as percentage of total assets
3,6
00
.5
5,1
50
.9
6,6
45
.6
4,5
33
.4
6,4
85
.5
7,2
44
.5
8,2
87
.4
39.5
48.6
53.6
33.6
43.8 45.4
47.1
20
25
30
35
40
45
50
55
60
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
FY16 FY17 FY18 FY16 FY20 FY21E FY22E
(%)
(₹ c
rore
)
Cash & Cash Equivalents As % of total assets
Source: Company, ICICI Direct Research
Exhibit 9: Return ratios trend
35.8 33.4
31.4
26.3
22.7
15.4
19.1
44.0
39.1 38.1
32.0
21.2
15.3
20.2
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
FY16 FY17 FY18 FY16 FY20 FY21E FY22E
(%)
RoE RoCE
Source: Company, ICICI Direct Research
HMCL has consistently paid out ~50% of post tax
earnings as dividend
Cash and equivalents formed ~44% of total assets
in FY20
Return ratios have come off their highs in recent
years. However, they are expected to return to
~20% levels in FY22E
ICICI Securities | Retail Research 6
ICICI Direct Research
Result Update | Hero MotoCorp
Exhibit 10: Valuation
S a les G rowth EP S G rowth P E EV /EBITDA RoNW RoC E
(₹ cr) (%) (₹ cr) (%) (x ) (x ) (%) (%)
F Y 18 32,230.5 13.2 185.1 9.5 15.1 9.3 31.4 38.1
F Y 19 33,650.5 4.4 169.5 -8.5 16.5 10.4 26.3 32.0
F Y 20 28,836.1 (14.3) 181.9 7.3 15.4 12.5 22.7 21.2
F Y 21E 28,215.0 -2.2 118.0 -35.1 23.7 15.1 15.4 15.3
F Y 22E 33,829.9 19.9 161.8 37.1 17.3 10.8 19.1 20.2
Source: Company, ICICI Direct Research
Exhibit 11: HMCL currently trading at 17.3x FY22E EPS of ~| 161.8/share
1000
1500
2000
2500
3000
3500
4000
4500
5000
Feb
-10
Ma
y-1
0
Au
g-1
0
No
v-1
0
Feb
-11
Ma
y-1
1
Au
g-1
1
No
v-1
1
Feb
-12
Ma
y-1
2
Au
g-1
2
No
v-1
2
Feb
-13
Ma
y-1
3
Au
g-1
3
No
v-1
3
Feb
-14
Ma
y-1
4
Au
g-1
4
No
v-1
4
Feb
-15
Ma
y-1
5
Au
g-1
5
No
v-1
5
Feb
-16
Ma
y-1
6
Au
g-1
6
No
v-1
6
Feb
-17
Ma
y-1
7
Au
g-1
7
No
v-1
7
Feb
-18
Ma
y-1
8
Au
g-1
8
No
v-1
8
Feb
-19
Ma
y-1
9
Au
g-1
9
No
v-1
9
Feb
-20
Ma
y-2
0
Au
g-2
0
(₹)
Price 24x 22x 20x 19x 17x 16x 14x
Source: Bloomberg, ICICI Direct Research
Exhibit 12: Shareholding pattern
(in %) Jun -19 S ep -19 Dec-19 Mar-20 Jun-20
P romoter 34.6 34.6 34.6 34.6 34.8
F II 35.2 36.5 35.3 34.3 32.7
D II 20.0 19.2 19.6 19.9 21.7
O thers 10.2 9.7 10.5 11.2 10.8
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 7
ICICI Direct Research
Result Update | Hero MotoCorp
Financial Summary
Exhibit 13: Profit and loss statement | crore
(Ye a r-e nd Ma rch ) F Y19 F Y20 F Y21E F Y22E
Tota l op e ra ting Incom e 33,650.5 28,836.1 28,215.0 33,829.9
G rowth (% ) 4.4 -14.3 -2.2 19.9
R aw Materia l E xpenses 23,317.7 19,697.4 20,063.5 24,022.3
E mployee E xpenses 1,730.2 1,841.7 1,725.9 1,839.6
O ther expenses 3,672.5 3,339.0 3,200.5 3,563.9
Total O perating E xpenditure 28,720.5 24,878.1 24,989.9 29,425.7
EBITDA 4930.1 3958.0 3225.1 4404.1
G rowth (% ) -6.0 -19.7 -18.5 36.6
D epreciation 602.0 818.0 775.9 845.7
Interes t 8.6 22.0 24.8 26.0
O ther Income 691.3 778.3 724.4 787.3
P BT 5010.4 3896.3 3148.8 4319.7
Total Tax 1,625.9 940.4 791.7 1,088.6
P AT 3384.6 3633.3 2357.2 3231.1
G rowth (% ) -8.5 7.3 -35.1 37.1
Normalised P AT (₹) 3,384.6 3,202.6 2,357.2 3,231.1
EP S (₹) 169.5 181.9 118.0 161.8
Normalised E P S (₹) 169.5 160.4 118.0 161.8
Source: Company, ICICI Direct Research
Exhibit 14: Cash flow statement | crore
(Ye a r-e nd Ma rch ) F Y19 F Y20 F Y21E F Y22E
P ro fit a fte r Ta x 3,384.6 3,633.3 2,357.2 3,231.1
Add: D epreciation 602.0 818.0 775.9 845.7
(Inc)/dec in C urrent Assets -1,696.4 1,459.9 81.4 -650.9
Inc/(dec) in C L and P rovis ions -213.0 -182.6 -357.2 714.5
C F from op e ra ting a ctivitie s 2077.2 5728.5 2857.2 4140.5
(Inc)/dec in Inves tments 2,107.5 -1,846.7 -700.0 -990.0
(Inc)/dec in F ixed Assets -789.5 -2,115.9 -600.0 -1,200.0
O thers -1,103.7 543.5 -300.0 -300.0
C F from inve sting a ctivitie s 214.3 -3419.2 -1600.0 -2490.0
Inc/(dec) in loan funds 0.0 150.0 0.0 0.0
D ividend paid & dividend tax -2,084.9 -2,156.8 -1,198.2 -1,597.6
Inc/(dec) in S ec. premium & O thers -8.6 -22.0 -24.8 -26.0
C F from fina ncing a ctivitie s -2304.9 -2226.0 -1223.0 -1623.6
Net C ash flow -4.8 105.3 59.0 52.9
O pening C ash 141.3 136.5 241.9 300.9
C losing C a sh 136.5 241.9 300.9 353.8
Source: Company, ICICI Direct Research
Exhibit 15: Balance Sheet | crore
(Ye a r-e nd Ma rch ) F Y19 F Y20 F Y21E F Y22E
L ia b ilitie s
E quity C apita l 39.9 39.9 39.9 39.9
R eserve and S urplus 12,817.2 14,096.5 15,255.5 16,889.0
Tota l S ha re ho ld e rs fund s 12857.1 14136.4 15295.4 16928.9
Total D ebt 0.0 150.0 150.0 150.0
D eferred Tax L iability 536.5 392.8 392.8 392.8
O thers 117.2 122.4 122.4 122.4
Tota l L ia b ilitie s 13510.8 14801.6 15960.6 17594.1
Asse ts
G ross B lock 7,998.8 10,316.2 10,896.2 11,946.2
Less : Acc D epreciation 3,521.3 4,339.2 5,115.1 5,960.9
Ne t Block 4477.5 5977.0 5781.0 5985.3
C apita l WIP 360.7 160.3 180.3 330.3
Total F ixed Assets 4,838.2 6,137.2 5,961.3 6,315.5
Inves tments 5,968.6 8,222.7 9,222.7 10,512.7
Inventory 1,072.4 1,092.0 927.6 1,112.2
D ebtors 2,821.6 1,603.1 1,700.6 2,039.1
Loans and Advances 25.0 22.4 21.5 25.8
C a sh 136.5 241.9 300.9 353.8
Total C urrent Assets 4,948.6 3,594.1 3,571.7 4,275.5
C reditors 3,355.3 3,030.5 2,705.5 3,244.0
P rovis ions 59.0 146.6 130.8 156.9
Total C urrent L iabilities 4,130.4 3,947.7 3,590.5 4,305.0
Ne t C urre n t Asse ts 818.3 -353.7 -18.8 -29.5
Ap p lica tion o f F und s 13510.8 14801.6 15960.6 17594.1
Source: Company, ICICI Direct Research
Exhibit 16: Key ratios
(Ye a r-e nd Ma rch ) F Y19 F Y20 F Y21E F Y22E
P e r sha re d a ta (₹)
E P S 169.5 181.9 118.0 161.8
C ash E P S 199.6 222.9 156.9 204.1
B V 643.8 707.9 765.9 847.7
D P S 87.0 90.0 60.0 80.0
C ash P er S hare 227.0 324.8 362.8 415.0
O p e ra ting R a tios (%)
E B ITD A Margin 14.6 13.7 11.4 13.0
P B T / Net sales 12.9 10.9 8.7 10.5
P AT Margin 10.1 12.6 8.4 9.6
Inventory days 11.6 13.8 12.0 12.0
D ebtor days 30.6 20.3 22.0 22.0
C reditor days 36.4 38.4 35.0 35.0
R e tu rn R a tios (%)
R oE 26.3 22.7 15.4 19.1
R oC E 32.0 21.2 15.3 20.2
R oIC 59.9 39.9 29.7 40.5
V a lua tion R a tios (x )
P /E 16.5 17.5 23.7 17.3
E V / E B ITD A 10.4 12.5 15.1 10.8
Market C ap / S ales 1.7 1.9 2.0 1.7
P rice to B ook V alue 4.3 4.0 3.7 3.3
S o lve ncy R a tios
C urrent R atio 1.3 1.0 1.1 1.1
Q u ick R a tio 1.0 0.7 0.8 0.8
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 8
ICICI Direct Research
Result Update | Hero MotoCorp
Exhibit 17: ICICI Direct coverage universe (Auto & Auto Ancillary)
S e cto r / C om p a ny C MP TP M C a p
(₹) (₹) R a ting (₹ C r) F Y20 F Y21E F Y22E F Y20 F Y21E F Y22E F Y20 F Y21E F Y22E F Y20 F Y21E F Y22E F Y20 F Y21E F Y22E
Apollo Tyre (AP O TY R ) 130 120 Hold 7,437 8.3 4.9 8.9 15.6 26.5 14.6 7.0 6.1 5.1 4.7 4.7 6.6 4.8 2.5 4.9
Ashok Leyland (AS HLE Y ) 62 65 Hold 18,148 0.8 0.3 2.5 76.0 244.7 25.2 17.2 21.6 11.1 4.4 2.3 9.2 4.7 1.0 9.3
B ajaj Auto (B AAUTO ) 2,985 3,210 Hold 86,377 176.2 136.9 173.5 16.9 21.8 17.2 13.6 16.4 12.0 23.8 23.3 26.6 25.6 17.9 20.2
B harat F orge (B H AF O R ) 495 415 Hold 23,046 7.5 3.5 13.7 66.0 142.0 36.2 23.0 31.2 17.3 5.8 2.2 7.9 7.8 3.0 11.1
E icher Motors (E IC MO T) 20,130 22,570 Hold 54,874 670.4 465.7 712.6 30.0 43.2 28.2 22.2 27.7 18.9 17.2 11.4 15.3 18.3 11.6 15.4
E scorts (E S C O R T) 1,100 1,300 B uy 13,484 39.6 46.1 54.5 27.8 23.9 20.2 18.5 15.6 13.1 18.9 15.0 15.2 14.2 11.2 11.8
E xide Indus tries (E XIIND ) 163 180 B uy 13,855 9.7 6.3 8.9 11.8 18.0 12.9 10.0 12.4 9.6 15.7 10.3 13.5 13.4 8.2 10.7
He ro Moto (HER HO N) 2,800 3,235 Buy 55,916 181.9 118.0 161.8 15.4 23.7 17.3 12.5 15.1 10.8 21.2 15.3 20.2 22.7 15.4 19.1
M&M (MAHMAH) 615 700 B uy 76,457 10.7 27.9 38.2 57.5 22.1 16.1 12.6 13.0 9.8 12.9 10.8 13.8 6.4 9.2 11.6
Maruti S uz uk i (MAR UTI) 6,590 5,300 R educe 1,99,071 187.1 124.9 203.4 35.2 52.7 32.4 22.5 30.8 18.9 7.4 3.5 8.2 11.7 7.4 11.1
Minda Industries (MININD ) 285 320 B uy 7,473 5.9 2.8 9.6 48.2 100.9 29.6 13.4 15.2 10.3 10.6 6.6 12.7 10.3 5.1 13.6
Tata Motors (TATMO T) 125 115 Hold 45,688 -32.8 -24.6 7.4 NM NM 16.8 4.9 5.1 3.4 1.4 1.1 6.8 -18.7 -16.5 4.8
R oE (%)EP S (₹) P /E (x ) EV /EBITDA (x) R oC E (%)
Source: Bloomberg, ICICI Direct Research
ICICI Securities | Retail Research 9
ICICI Direct Research
Result Update | Hero MotoCorp
RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%
Pankaj Pandey Head – Research [email protected]
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities | Retail Research 10
ICICI Direct Research
Result Update | Hero MotoCorp
ANALYST CERTIFICATION
I/We, Shashank Kanodia, CFA, MBA (Capital Markets), and Jaimin Desai, CA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect
our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that
above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies
mentioned in the report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a SEBI registered
Research Analyst with SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank
and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on
www.icicibank.com
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship
with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the
securities or derivatives of any companies that the analysts cover.
Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as
such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.
Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.
ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may
not match or may be contrary with the views, estimates, rating, target price of the Institutional Research.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected
recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would
endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI
Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in
circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein
is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting
and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who
must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient.
The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities
whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks
associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-
managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other
benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of
interest at the time of publication of this report.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of
the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this
report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or
use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.