Buy Hero Honda - Motilal Oswal

HERO HONDA: Below estimates; Volumes at 466,524 units (+20% YoY, -7% MoM)

Hero Honda reported Jan-11 volumes of 466,524 units (vs est 485,000), a growth of 20% YoY (~7% MoM), driven by strong demand at retail level.

Refreshed product portfolio has also helped to drive volumes. It has launched 6 new launches comprising a mix of new models, variants and refreshes.

Mr Anil Dua. Sr. VP – Mktg, said " This is the ninth consecutive month of four lakh-plus sales, coming on the back of five-lakh plus sales each in Oct & Dec."

We currently model volume growth of 16.7% for FY11 to 5.36m units, higher contribution from Haridwar plant, and 420bp decline in margins to 12.7%.

With ownership issue settled, we expect strong performance to be driven by the business momentum in the short run and smooth transition in the long run. The stock trades at 13.3x FY12E EPS of Rs120.9 and 11.7x FY13 EPS of Rs137.2. Buy.

Source : Equity Bulls

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