Hero Honda - Under Review - Motilal Oswal

HERO HONDA: Below estimates; Volumes at 421,336 units (+10.5% YoY, -17% MoM)

- Hero Honda reported Nov-10 volumes of 421,336 units, a growth of 10.5% YoY. Production was curtailed in month of November due to Diwali holidays.

- It has launched 6 new launches comprising a mix of new models, variants and refreshes over last 6 months. Splendor Pro has brought in the biggest-ever change in Splendor since its launch.

- Mr Anil Dua. Sr. VP – Mktg, said “The four lakh plus sales consistently recorded over the past seven months has imparted an excellent momentum to our sales for the rest of the year, we anticipate maintaining this buoyancy going forward."

- We model volume growth of 16.7% for FY11 to 5.36m units (implying a residual monthly run rate of 479,982 units v/s 430,840 units in FY11YTD), higher contribution from Haridwar plant (~34% of volumes), and 390bp decline in margins to 13%. The stock trades at 18.1x FY11E EPS of Rs106.4 and 15.1x FY12 EPS of Rs128. Under Review.

Source : Equity Bulls

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