Hero Motocorp (Q3 FY14)
India Infoline News Service | Mumbai |
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.
CMP Rs2,002, Target Rs2,350, Upside 17.4%
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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
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Margins at 13.1% were lower than our expectations mainly owing to higher than estimated ad spends and unfavorable currency
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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
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Cost cutting initiatives to add an estimated 300bps to margins by FY17
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Maintain BUY with a 9-month price target of Rs2,350
| (Rs m) |
Q3 FY14 |
Q3 FY13 |
% yoy |
Q2 FY14 |
% qoq |
| Volume |
1,680,940 |
1,573,135 |
6.9 |
1,416,211 |
18.7 |
| Realisation |
40,910 |
39,333 |
4.0 |
40,433 |
1.2 |
| Net sales |
68,768 |
61,876 |
11.1 |
57,262 |
20.1 |
| Material costs |
(49,991) |
(45,854) |
9.0 |
(40,955) |
22.1 |
| Personnel costs |
(2,439) |
(1,982) |
23.0 |
(2,290) |
6.5 |
| Other overheads |
(7,360) |
(6,253) |
17.7 |
(5,690) |
29.4 |
| Operating profit |
8,978 |
7,786 |
15.3 |
8,327 |
7.8 |
| OPM (%) |
13.1 |
12.6 |
47 bps |
14.5 |
(149) bps |
| Depreciation |
(2,732) |
(2,832) |
(3.5) |
(2,869) |
(4.8) |
| Interest |
(30) |
(30) |
0.7 |
(30) |
0.7 |
| Other income |
956 |
901 |
6.1 |
1,155 |
(17.2) |
| PBT |
7,171 |
5,826 |
23.1 |
6,583 |
8.9 |
| Tax |
(1,922) |
(947) |
103.0 |
(1,769) |
8.6 |
| Effective tax rate (%) |
26.8 |
16.3 |
|
26.9 |
|
| PAT |
5,250 |
4,879 |
7.6 |
4,814 |
9.0 |
| PAT margin (%) |
7.6 |
7.9 |
(25) bps |
***Note: This is a
NSE Chart
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