Most analysts cut their target price for Hero MotoCorp Ltd. as Indian automakers are yet to recover from the worst sales slowdown in a decade.
India’s second-largest two-wheeler maker by market said demand during the year will depend on the progress of monsoon, upcoming festive season and improvement in liquidity situation. Weak economic sentiments, it said in a media statement, impacted the company’s first-quarter performance.
Hero MotoCorp’s sales fell, and margin contracted in the quarter ended June. But its net profit beat estimates. Its profit jumped 38 percent year-on-year due to a Rs 737.5-crore one-time gain from the reversal of a national calamity contingent duty that the company paid for its Haridwar plant.
Here’s what brokerages have to say about Hero MotoCorp’s first-quarter performance:
CLSA
- Maintains ‘Sell’, cuts target price to Rs 2,100 from Rs 2,350 apiece.
- Cuts EPS estimates by 4-6 percent.
- No signs of spring in Indian two-wheeler market.
- Margin headwinds to persist.
UBS
- Maintains ‘Sell’; cuts target price to Rs 2,250 from Rs 2,400 apiece.
- First quarter in line on good cost control; Ebitda margin rose.
- Expects domestic volume to decline 10/4 percent in FY20/FY21.
- Management says dealer funding issues not acute.
Macquarie
- Downgrades to ‘Neutral’ from ‘Outperform’; cuts target price to Rs 2,400 from Rs 3,000 apiece.
- Cuts EPS estimates by 12 percent for FY20/21 due to lower volume assumption.
- Underlying operating performance remained muted due to lower sales and cost hike.
- Weak demand, high channel inventory, regulatory changes and intense competition.
Motilal Oswal
- Maintains ‘Neutral’ with a target price of Rs 2,525 apiece.
- Cuts FY21 EPS estimate by about 4 percent to factor in reduced volume, lower margins
- Retail volumes declined 6 percent in first quarter.
- Enquiry levels are good, but demand deferment is a problem.
- Company is hopeful of a demand recovery starting with festive season.
CIMB
- Maintains ‘Add’ with a target price of Rs 2,962 apiece.
- Higher rainfall and favourable government policy to aid rural demand.
- 110cc scooter segment sales volume declined 23 percent during the first quarter.
- Hero could be a beneficiary of easing concerns over rainfall.