Brokerage house Emkay Global Financial Services is bullish on Hero Motocorp and has recommended buy rating on the stock with a target price of Rs 3350 in its research report.
Hero Motocorp Q2FY15 results were in-line with our/consensus expectations
EBITDA Margin stood at 13.5% (-100 bps YoY, flat QoQ). On a QoQ basis, volumes were flat, product mix was relatively stable and currency movement was modest, resulting into a flattish operating performance
Net Profit at Rs 7.6 bn (+59% YoY, +36% QoQ) was above estimate, largely owing to the higher other income, as the company booked profits on its investment book to meet the payout of the interim dividend . Net profit growth YoY/QoQ look disproportionately high as the licensee fee cost amortization (~Rs 2 bn/qtr) to Honda concluded in Q1FY15
We retain our earnings estimates for FY15/FY16 but raise our TP to Rs 3,350, as we roll forward to FY17 estimates – our TP is based on 15xFY17E EPS of Rs 222.
"Post Q2 results, we maintain our FY15/FY16 earnings estimate but raise our TP to Rs 3,350, as we roll-forward to FY17 estimates. We believe our estimates could see upsides on both volumes (as inflation tames and GDP trajectory improves) and margins (as benefit of cost saving exercises trickle in). We recommend BUY", says Emkay Global Financial Services research.
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