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HMCL reported an OPM of 13.1% in Q3 FY14 reflecting an improved yoy performance (+47bps yoy). However, the margins were lower on a sequential basis by 149bps.
Revenue growth was at 11.1% driven by 6.9% volume growth led by scooters, realizations were higher by 4% owing to better product mix with higher contribution from scooters along with price hikes implemented over the past four quarters
Margins at 13.1% were lower than our expectations mainly owing to higher than estimated ad spends and unfavorable currency
Tax rate was higher at 26.8%, on back of part reduction of tax benefit at Pantnagar and additional surcharge element introduced in the FY14 budget
Cost cutting initiatives to add an estimated 300bps to margins by FY17
Maintain BUY with a 9-month price target of Rs2,350
