Buy Hero MotoCorp; target of Rs 3345: Geojit

Geojit's research report on Hero MotoCorp

Hero MotoCorp (HMCL) is India’s leading two-wheeler manufacturer in terms of unit volume sales in a calendar year. It holds nearly 50% of the market share in the Indian motorcycle market. The company has eight manufacturing facilities, five in India and one each in Colombia and Bangladesh. Standalone revenue makes significant recovery jumping 215.2% QoQ, as company records highest ever sales in the month of September and for the quarter. HMCL makes market share gains of 300bps. EBITDA margin rose to 13.7% (vs. 3.6% in Q1FY21) on higher price realisations coupled with stringent cost management measures, and restoration of supply chains. Resultantly, PAT up to pre-COVID levels. Company has adequate inventory levels in place for the upcoming festive season as it sees traction in both rural and urban markets. New launches, improved consumer sentiments and ongoing festivities to aid growth in the coming months.

Outlook

HMCL looks very well positioned to take advantage of the rising demand. We upgrade our rating to BUY with a revised target price of Rs. 3,345 based on 19x FY22E adj. EPS.

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