Views on Hero MotoCorp's 4QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst – Auto & Auto Ancillary, Angel Broking) on Hero MotoCorps 4QFY2014 results:

"Hero MotoCorp's (HMCL) 4QFY2014 net profit at Rs. 554cr surpassed our expectations of Rs. 501cr. The beat on the bottom-line was driven by better-than-expected growth in net average realization to some extent; however, majority of it was on account of sharp increase in other income and aided further by marginally lower tax-rate.

The top-line recorded a growth of 6% yoy to Rs. 6,513cr, in-line with our estimates of Rs. 6,451cr, led by a 4.1% yoy growth in volumes and 2.2% yoy growth in net average realization. The volume performance was driven primarily by a strong growth of the scooter segment (15.5% yoy) even though the motorcycle segment registered a modest growth of 2.7% yoy. Exports growth though remained weak due to weakness in the global markets and posted a decline of 11.3% yoy. On the operating front, EBITDA margins expanded 67bp qoq to 13.7%, which was marginally better than our expectations of 13.4%. EBITDA margin expansion was led by growth in net average realization which led to gross margin expansion of 80bp sequentially. Additionally, cost control initiatives too aided margin expansion in our view. On a yoy basis though, EBITDA margins stood flat as the benefits on account of favorable exchange rate were negated by adverse product-mix. Net profit stood at Rs. 554cr, ahead of our estimates of Rs. 501cr, led by slightly better-than-expected operating performance and benefitting further due to 17.7% yoy increase in other income and slightly lower tax rate (at 25.2% as against 26.9% in 3QFY2014). At the CMP, the stock is trading at 14.1x FY2016E earnings. We maintain our Accumulate rating on the stock; our target price though is under review."

Shares of HERO MOTOCORP LTD. was last trading in BSE at Rs.2682.65 as compared to the previous close of Rs. 2587.5. The total number of shares traded during the day was 51064 in over 5209 trades.

The stock hit an intraday high of Rs. 2700 and intraday low of 2593. The net turnover during the day was Rs. 135479799.

Source : Equity Bulls

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