Reduce Hero MotoCorp with target price of Rs.1789 - Kotak

Hero MotoCorp reported 2QFY13 numbers slightly ahead of our expectations. Revenues in 2QFY13 stood at Rs51,875, lower by 11% YoY due to 14% YoY dip in volumes. Decline in volumes impacted operating leverage leading to 110 bps dip in EBITDA margin. Net profit came in at Rs4,406mn, 27% lower than 2QFY12 net profit of Rs6,036mn.

HMC's volumes in 2QFY13 were impacted on account of weak demand and inventory correction. While the company has indicated a good start to the festive season, we remain worried about demand sustainability post festive season as macro factors continue to remain weak. Further, HMC is also facing the heat of increase in competition. We continue with our cautious approach on the company over the medium term.

We maintain our REDUCE rating with a revised price target of Rs1,789 based on FY14 estimates.

Source : Equity Bulls

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