Hero MotoCorp - Q4FY13 Result Review - Angel Broking

Hero MotoCorp (HMCL) reported better-than-expected results for 4QFY2013 led by sequential improvement (up ~120bp) in operating margins to 13.8%. The margin improvement was largely due to the depreciation of Yen (vs. the INR) which led to significant savings on the raw-material front. While the top-line growth was largely in-line with our estimates; bottom-line came in 16.7% ahead of our estimates driven by strong operating performance.

For 4QFY2013, HMCL's top-line recorded a modest growth of 1.8% yoy (down 0.7% qoq) to Rs. 6,146cr driven primarily by 4.8% yoy (1.7% qoq) growth in net average realization. Volume performance however was subdued (down ~3% yoy and qoq) owing to slowdown in demand and increasing competition from Honda Motors and Scooters India. The operating performance witnessed a sharp improvement during the quarter as margins expanded ~120bp qoq to 13.8% led by 3.2% decline in raw-material cost. We believe this could possibly be on account of ongoing depreciation in Yen vs. the INR. Led by better-than-expected operating performance, bottom-line registered a robust growth of 17.7% qoq to Rs. 574cr, which was ahead of our expectations of Rs. 492cr. On a yoy basis though, net profit declined 4.9% following 150bp decline in operating margins.

At the CMP of Rs. 1,597, the stock is trading at 11.8x FY2015E earnings. We shall release a detailed note post the conference call with the management which is scheduled on April 29, 2013. We maintain our Accumulate rating on the stock with a target price of Rs. 1,767.

Source : Equity Bulls

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