HERO MOTOCORP LIMITED - MOTOCORP LIMITED Result ... The initial plan is to make Hero FinCorp services available at about 200 ... of unit volume sales in 2001. Hero MotoCorp Ltd. Hero

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  • CMP 1974.00

    Target Price 2171.00

    ISIN: INE158A01026

    JANUARY 31st

    2014

    HERO MOTOCORP LIMITED Result Update: Q3 FY14

    BUYBUYBUYBUY

    Index Details

    Stock Data

    Sector Automobiles

    BSE Code 500182

    Face Value 2.00

    52wk. High / Low (Rs.) 2214.70/1434.05

    Volume (2wk. Avg.) 26000

    Market Cap (Rs. in mn.) 394207.80

    Annual Estimated Results (A*: Actual / E*: Estimated)

    YEARS FY13A FY14E FY15E

    Net Sales 237681.10 255017.54 270318.60

    EBITDA 36828.60 40257.28 42625.77

    Net Profit 21181.60 21360.78 23630.72

    EPS 106.07 106.96 118.33

    P/E 18.61 18.45 16.68

    Shareholding Pattern (%)

    1 Year Comparative Graph

    HERO MOTOCORP LTD S&P BSE SENSEX

    SYNOPSIS

    Hero MotoCorp Ltd (HMCL) is the worlds largest

    manufacturer of two-wheelers based in India.

    During the quarter, the net profit of the Company is

    increased by 7.54% to Rs. 5246.60 million from Rs.

    4878.90 million in Q3 FY13.

    Revenue for the quarter rose by 11.14% to Rs.

    68767.80 million from Rs. 61876.20 million, when

    compared with the prior year period.

    During the period January-December 2013, the

    Company has sold record 61,83,784 units of two-

    wheelers compared to 61,20,259 units of two-

    wheelers sold in calendar year 2012.

    During the quarter, Hero MotoCorp has set up a

    Joint Venture Company (JVC) i.e. HMC Auto Ltd with

    Magneti Marelli S.p.A.

    HMCL plans to have presence in 20 new markets by

    March14 with at least four operations globally.

    The Company will finalize a Joint Venture agreement

    for Colombia within the first three months of 2014

    The company has launched new 250-cc sports Bike

    HX250R, the break-through Liquid-cooled Turbo

    charged Diesel concept Bike RNT, Indias first

    series hybrid scooter LEAP and 110cc scooter

    Dash.

    The company has started dispatching vehicles to

    other new markets such as Tanzania, Uganda,

    Burundi, Egypt, Ecuador, and Bangladesh.

    Net Sales of the company are expected to grow at a

    CAGR of 5% over 2012 to 2015E respectively.

    PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

    Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

    Hero Motocorp Ltd 1974.00 394207.80 106.07 18.61 7.87 3000.00

    Bajaj Auto Ltd 1902.80 552112.30 112.15 17.01 6.99 450.00

    TVS Motor Company ltd 77.50 36819.30 3.72 20.83 3.01 120.00

    Eicher Motors Ltd 4643.50 125555.10 90.90 51.08 19.96 200.00

  • Recommendation & Analysis - BUY

    With sales of 16,80,940 two-wheelers in Q3 FY14, the company registered a total turnover of Rs. 68767.80 mn

    and net profit after tax (PAT) of Rs 5246.60 mn, registered a growth of 11% and 7% respectively, compared to

    the corresponding quarter of previous year. EBIDTA margin for the third quarter of this financial year stood at

    13.06%. During the quarter, the EBIDTA has been affected due to partial recovery of rising metal costs and

    currency fluctuation.

    The cumulative sales for first three quarter of the year (April-Dec13) stands at 46,56,498 two-wheelers. The

    company registered a total turnover of Rs. 187625.10 mn and PAT of Rs. 15546.50 mn in this period. During the

    period January-December 2013, the Company has sold record 61,83,784 units of two-wheelers compared to

    61,20,259 units of two-wheelers sold in calendar year 2012.

    The company has started dispatching vehicles to other new markets such as Tanzania, Uganda, Burundi, Egypt,

    Ecuador, and Bangladesh. In Tanzania and Uganda, HMCL will have local assemblies. The Company plans to have

    presence in 20 new markets by March14 with at least four operations globally. The Company will finalize a Joint

    Venture agreement for Colombia within the first three months of 2014. It is preparing to set p a manufacturing

    unit in Colombia to cater to the Latin American markets in the first quarter of 2014. Hence, we recommend

    BUY for HERO MOROCORP LTD with a target price of Rs. 2171.00 on the stock.

    QUARTERLY HIGHLIGHTS (STANDALONE)

    Results updates- Q3 FY14,

    Hero MotoCorp Ltd. (Formerly Hero Honda Motors

    Ltd.) is the world's largest manufacturer of two -

    wheelers, based in India, reported its financial

    results for the quarter ended 31st Dec, 2013.

    Months Dec-13 Dec-12 % Change

    Net Sales 68767.80 61876.20 11.14

    PAT 5246.60 4878.90 7.54

    EPS 26.27 24.43 7.54

    EBITDA 9936.50 8687.50 14.38

    The companys net profit jumps to Rs. 5246.60 million against Rs. 4878.90 million in the corresponding quarter

    ending of previous year, an increase of 7.54%. Revenue for the quarter rose by 11.14% to Rs. 68767.80 million

    from Rs. 61876.20 million, when compared with the prior year period. Reported earnings per share of the

    company stood at Rs. 26.27 a share during the quarter, registering 7.54% increase over previous year period.

    Profit before interest, depreciation and tax is Rs. 9936.50 millions as against Rs. 8687.50 millions in the

    corresponding period of the previous year.

  • Break up of Expenditure

    Break up of Expenditure

    Rs. In Millions

    Q3 FY14 Q3 FY13

    Cost of Material Consumed 49786.70 44015.70

    Other Expenditure 7360.10 6253.30

    Employee Benefit Expenses 2438.60 1982.40

    Depreciation & Amortization Expense

    2732.40 2832.30

    Total Expenditure 62520.50 56922.00

    A NEW vision for a NEW Hero

    With HMCL fast augmenting its presence globally and further strengthening its leadership in the domestic

    market, the company unveiled a global vision for brand Hero- to be achieved by year 2020:

    Surpass 100 million units in cumulative production

    Annual bike and scooter sales of 12 million

    More than 20 manufacturing and assembly plants across the globe

    Sales in more than 50 countries

    Turnover of Rs 60,000 crore

    Latest Updates

    During the quarter, Hero MotoCorp Limited has set up a Joint Venture Company (JVC) i.e. HMC Auto Ltd with

    Magneti Marelli S.p.A and has initially invested approx. Rs. 18 million as part of capital contribution in the

    JVC.

    During the period January-December 2013, the Company has sold record 61,83,784 units of two-wheelers

    compared to 61,20,259 units of two-wheelers sold in calendar year 2012.

    The company has launched new 250-cc sports bike HX250R, the break-through Liquid-cooled Turbo

    charged Diesel concept bike RNT, Indias first series hybrid scooter LEAP and 110cc scooter Dash.

  • Showcased next-gen features to be introduced in its new product line-up:

    i3S Technology (Idle Stop & Start System) to debut on all new Splendor iSmart

    Integrated Braking System (IBS) to be introduced in the all-new Pleasure

    Electronic Immobilizer to debut on the new 150cc Xtreme

    Global Foray

    The company has started dispatching vehicles to other new markets such as Tanzania, Uganda, Burundi,

    Egypt, Ecuador, and Bangladesh. In Tanzania and Uganda, HMCL will have local assemblies.

    HMCL plans to have presence in 20 new markets by March14 with at least four operations globally.

    The Company will finalize a Joint Venture agreement for Colombia within the first three months of 2014. It is

    preparing to set p a manufacturing unit in Colombia to cater to the Latin American markets in the first

    quarter of 2014.

    Investments

    Hero MotoCorps newly-incorporated wholly-owned American subsidiary - HMCL (NA).

    Hero MotoCorp is investing US$25 million for a total stake of 49.2% in the share capital of Erik Buell Racing

    (EBR). The first tranche of US$15 million has already been invested by HMCL. The second tranche of US$10

    million is proposed to be invested within the next nine months. The equity partnership with EBR is reflective

    of its long-term vision of transforming Hero MotoCorp to a truly global two-wheeler major with footprints

    spread across continents, offering a wide range of technologically-advanced two-wheelers.

    Hero MotoCorp recently launched its own retail finance arm, Hero FinCorp, with a phase-wise expansion

    plan. Having been launched in Delhi, the retail financing services will shortly be extended to the National

    Capital Region and then to the rest of the northern market in the next phase. The initial plan is to make Hero

    FinCorp services available at about 200 dealerships in various parts of the country by March 2014, and

    extend it to as many as 450 dealerships by March 2015.

    HMCL recently commenced construction of its Rs 450 Crore Hero Centre of Global Innovation and Research

    & Design (R&D) at Kukas, Jaipur in Rajasthan.

    Hero MotoCorp Ltd is setting up two new plants at Neemrana, Rajasthan and Gujarat and it has integrated a

    R&D Centre at Kukas, Jaipur with an investment of Rs. 2500 crore.

  • Expansion

    Setting up a fourth plant at Neemrana in Rajasthan with an annual installed capacity of 750,000 units.

    Setting up a fifth plant at Halol in Gujarat, with an annual installed capacity of 1.2 million in the initial phase,

    which will grow to 1.8 million in the next phase.

    Setting up a new state-of-the-art integrated R&D centre at Kukas, Rajasthan.

    Consistent expa