L&T, Hero MotoCorp, TVS Motor, Bharat Forge, IGL, GSPL, Kajaria Ceramics Q4 Review: HDFC Securities

HDFC Securities Institutional Equities

Hero Motocorp - Firing on all engines

Hero MotoCorp Ltd.’s Q4 margin, at 14.3%, was ahead of our estimate of 13%, led by better realisation and benign commodity prices. With better consumer sentiment aided by marriage dates and festivals in April, there was recovery seen in the entry-level segment.

Hero MotoCorp expects this momentum to continue with the expectation of a normal monsoon. To cater to this segment, it has planned launches of Xoom 125R and Xoom 160 in H1 FY25.

The change in distribution strategy (Hero 2.0) and scaling up of Premia showrooms coupled with the rampup of new premium launches are expected to drive market share gains for HMC in FY25.

With the scale-up of distribution of premium models (HD X440, Mavrick 440, Karizma), Hero MotoCorp is confident of a double-digit revenue growth in FY25.

While it is firing on all segments – domestic and export, we remain cautious, given its patchy track record of new launches in these segments. Maintain Reduce with a revised target price of Rs 3,876 (from Rs 3,535), based on SOTP valuation.

Larsen & Toubro - In-line performance; margin guidance muted

Larsen & Toubro Ltd. reported an in-line performance, with revenue/Ebitda/adjusted profit after tax at Rs 670.8/72.3/43 billion, a beat/(miss) of 1.3/(7.4)/(1.2)%. Project and manufacturing margins came in weaker than expected which resulted in L&T achieving the lower end of FY24 margin guidance of 8.25-8.5% at 8.2%.

L&T gave 15/10% revenue/order inflow guidance for FY25 which is better than expected. P&M margin guidance was weak at 8.2% versus 9% expectation. We have recalibrated our estimates lower to factor in the same.

L&T expects FY25 execution to have a higher share of lower margin export orders; it guided margin rerating to be driven by infra segment margins improvement, largely led by internal efficiency. Given:

1. the record-high order book of Rs 4.7 trillion;

2. likely bottoming out of infra margins;

3. improvement in subsidiary performance; and

4. higher public capex towards a green economy,

we maintain our Buy stance with a reduced SOTP based target price of Rs 4,033/share.

TVS Motor - Margins continue to improve

TVS Motor Company Ltd.’s Q4 Ebitda at Rs 9.3 billion came in ahead of our estimates of Rs 8.8 billion aided by improvement in realisation and benign commodity prices. TVS continues to outperform the industry on the back of healthy demand for its products like Raider, i-Qube, Jupiter125, etc. In exports, having established its presence in Africa, its outperformance is likely to be driven by its focus on penetrating Latin America in the coming years.

Even in two-wheeler electric vehicles, TVS is putting the right building blocks in place to emerge as a leading player. Its investments in e-bikes in Europe, Norton and the extension of tie-up with BMW Motorrad are expected to deliver strong returns over a two-three year horizon.

Given its steady margin improvement in FY24 and continued market share improvement, we have raised our estimates by 2% each for FY25-26E. We maintain Buy with a revised target price of Rs 2,262/share (earlier Rs 2,211), based on 29 times EPS for Mar-26.

Indraprastha Gas - Higher expenses impact earnings

We maintain our Buy recommendation on Indraprastha Gas Ltd. with a target price of Rs 520, given-

1. strong volume growth of ~11% CAGR over FY24-26E,

2. healthy margins supported by higher allocation of gas from the highpressure, high-temperature fields to the priority sector, and

3. a strong portfolio of new geographical areas ensuring volume growth visibility.

Q4 FY24 Ebitda/adjusted profit after tax at Rs 5.2/3.8 billion were up 13/16% YoY respectively but came in below our estimates, owing to higher-than-expected opex.

However, this was partially offset by the higher-than-expected volume of 8.73 mmscmd (+6% YoY; +3% QoQ)

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