Brokerages’ Take On Hero MotoCorp’s Q1 Results

Hero MotoCorp Ltd. missed analysts' estimates in the quarter ended June as commodity costs rose and sales declined amid local lockdowns to curb the second Covid-19 wave.

Net profit of India's largest two-wheeler maker fell 58% sequentially in the first quarter of the ongoing fiscal. Its revenue, operating income, too, declined over the preceding three months and margin contracted during the period.

ICICI Securities said the Pawan Munjal-led company was witnessing demand pressures in the entry-level segment due to weak consumer sentiment, and rising vehicle prices further hit profitability.

Hero MotoCorp's shares were trading 0.33% higher as 11:50 a.m. on Friday compared with a 0.75% gain in the Nifty 50. Of the 46 analysts tracking the company, 27 recommend a ‘buy', 14 have a ‘hold' rating and five suggest a ‘sell', according to Bloomberg data.

What brokerages have to say about Hero MotoCorp after its first-quarter FY22 results:

ICICI Securities 

• Maintains ‘add' with a target price of Rs 2,965, implying an upside of 6.5% from Thursday's close.

• Missed consensus estimates as margins came in at 9.4% (down 449 bps QoQ).

• Retail demand trends remain key as festive season approaches.

• Two-wheeler retail demand trends gradually improving post-Covid reopening.

• The company's multi-pronged strategy (Ather/Gogoro) bodes well for its future product launches.

Motilal Oswal

• Maintains ‘buy' with a target price of Rs 2,513, implying a downside of 9.6% from Thursday's close.

• In-line performance despite higher raw material and staff costs.

• Gross margin contracted 210 bps QoQ (390 bps YoY) to 27.5% due to commodity cost inflation during the quarter.

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