Prabhudas Lilladher recommended accumulate rating on Hero Motocorp with a target price of Rs 3824 in its research report dated September 10, 2018.
Prabhudas Lilladher's research report on Hero Motocorp
In our recent interaction with the Hero MotoCorp management, management indicated their confidence of achieving a double digit volume growth for FY19 mainly on account of favorable macros, new launches and strong brand presence in core segments. Although company's core commuter segment is holding up despite aggressive pricing from competitors, further market share gains will largely depend on the success of new model launches in the white spaces (125cc Scooter and 200cc premium motorcycle) of its product portfolio. We are impressed by Hero's market share resiliency in the 75-110cc motorcycle segment and are confident that the company will be able to maintain its dominant position in the medium-to-long-term, as we have seen in the past that pricing game alone is not enough and consumers stick to brands with a better re-sale value in this segment. However, the success of launches in the 125cc scooter and the premium motorcycle (200cc) segment would be key and provide much needed market share gains to the company and change 7its perception of largely being a commuter segment player.
Outlook
We estimate 9% volume and EPS CAGR of 7% over FY18-20. We maintain 'Accumulate' with a price target of Rs3,824 based on 18x Mar'20 EPS.
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