HeroMoto - Result Analysis Q1 FY21

HeroMoto - Result Analysis Q1 FY21

CMP: 2,792 (As on 14-082020)

Total income from operations 2,969 Cr 

8,186 Cr (-63.71%) YoY | 6,334 Cr (-53.18%) QoQ 

Year ending revenue: 29,235 Cr Vs. 33,971 Cr (-13.91%)

Net Profit of 57.8 Cr 

1,257 Cr (-95.41%) YoY 614 Cr (-90.73%) QoQ 

Year ending Net profit: 3,659 Cr Vs. 3,444 Cr (6.24%)

EPS (in Rs.) 2.96

62.92 YoY | 30.27 QoQ 

Year ending EPS: 182.15 Vs. 172.42

View: Result is line with the expectation. YoY and QoQ revenue declined and profit significantly down in YoY and QoQ as the quarter was impacted by lockdown for most parts of the three months' period.

Business Updates & Highlights:

Q1FY21 standalone EBITDA was around INR 108 Cr Vs. 1,173 Cr in Q1FY20 Vs. 686 Cr in Q4FY20 therefore declined by 90.8% in YoY and 84.2% in QoQ. EBITDA margin in Q1FY21 was 3.6% Vs. 14.3% in Q1FY20 Vs. 10.8% in Q4FY20. 

Hero MotoCorp sold a total of 5.65 Lacs units of motorcycles and scooters in the first quarter of Financial Year (April-June) 2020-21. 

Market share for the Q1'21 at 34.6%, a gain of 333 bps on YoY basis.

Financial

ROE and ROCE is around 22% and 27% respectively and book value per share is around INR 721 and share is currently trading at 3.9x of its book value. Company is currently trading at annualized PE of around 21 which is fair as per Industry benchmark. Promoter holding in the company is around 34.8% which is low and marginally increased in this quarter. FIIs, mutual fund and insurance cos hold around 32.7%, 8% and 9.3% respectively. 

Position: Share strong support price is INR 2,640. Long term investor should continue with the company.

Share View: Share price high 3,021 (52 week) and now 2,811. Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of two – wheelers, based in India. In 2001, the Company achieved the coveted position of being the largest two-wheeler manufacturing Company in India and also, the ‘World No.1’ two-wheeler Company in terms of unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position till date.

Opportunities

Hero MotoCorp Limited (HMCL) as evidenced by its market leadership in the domestic two-wheeler industry with an overall market share of 35.7% and 52% market share in the motorcycle segment, its strong product portfolio. July month sales were more than 95% of Pre-Covid sales and company also see positive trend moving forward as Rural economy is on track and company has strongly come back. Hero MotoCorp commenced the dispatches of its much-awaited motorcycle - the Hero Xtreme 160R. The Xtreme 160R further strengthens Hero MotoCorp's presence in the premium motorcycle segment. Hero MotoCorp launched an integrated online sales platform - eSHOP. The website enables a seamless buying experience for the customers - completely digital. 

The company is expected to utilise internal accruals for a proposed capex of Rs. 550-600 crore in FY2021 and incur incremental strategic investments (predominantly in Ather Energy Private Limited, or Ather, and Hero FinCorp Limited, or HFCL), the management’s prudent track record provides comfort. To diversify its product mix and reduce its dependence on the entry (75-110cc) and executive (110-125cc) segments of motorcycle and rural markets, the company has taken several initiatives. These include investments towards launching products in the premium motorcycle segment as well as scooter segment, which have a more urban clientele. Over the past two years, HMCL has launched four products from its ‘X series’ motorcycles in the 150-200cc displacement category and two products in 125cc scooter segment. Successful ramp-up of these new products could help consolidate HMCL’s market position and diversify revenue streams. Company will continue to maintain its leadership position in the Indian two-wheeler industry aided by its strong product portfolio and established brands, regular investments in new model launches, and extensive dealership network. HMCL is a market leader in the motorcycle segment with a 52% share of the domestic market in FY2020. Company is virtually debt free. 

Risk

The Indian two-wheeler industry is highly competitive with regular new product launches and refreshes by OEMs to gain market share. The company is significantly dependent on the domestic market, which accounted for 97% of total volumes dispatched in FY2020. HMCL’s share in total two-wheeler exports from India in FY2020 was muted at 5.1%. Also, most of its products in the entry and executive sub-segments of motorcycles have direct correlation with rural and semi-urban demand sentiments. A steep decline in sales volumes beyond FY2021 due to a prolonged impact of the ongoing pandemic leading to sharp contraction in profitability metrics or significant erosion in market share on a sustained basis amid increasing competition.

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

Follow, Like, subscribe and share

"Your Trust, Our Financial Expertise."

Infyture, Investment For Your Future

Contact: +91-7990271953 // 8347871052

Email: infyture@gmail.com

Website: http://infyture.wordpress.com

Facebook Page: https://www.facebook.com/infyture4future/

Youtube:https://www.youtube.com/channel/UCjOxVGTKQiK5O0mdcuMBCdw?view_as=subscriber

Blogger: https://infyture.blogspot.com/

Financial Planning || Equity Tip || Demat Account || Mutual Fund Investment || Life Insurance || General & Health Insurance || PMS & mini PMS || Retirement Planning || NPS Enrollment