Most analysts hiked target price for Hero MotoCorp Ltd. as the two-wheeler maker's quarterly net profit managed to beat estimates even as its sales volume fell amid a prolonged auto slowdown. But they remain cautious as a recovery in demand may still be some time away.
The company's net profit fell 10.3 percent over last year to Rs 875 crore during the July-September period, according to its exchange filing. That, however, beat the Bloomberg consensus estimate of Rs 775 crore.
The bottomline was mainly hurt because of a decline in sales volumes and about Rs 60 crore expense related to one-time voluntary retirement scheme. Hero MotoCorp's sales volumes fell 20.1 percent year-on-year to 16.91 lakh units during the quarter.
The company's operating income, though fell, managed to beat estimates. The fall was partly offset by higher-than-expected realisations that rose 5 percent year-on-year to Rs 44,761 per unit.
Here's what brokerages have to say about Hero MotoCorp's Q2 Results 2019-20.
JPMorgan
- Maintains ‘Underweight' but hikes target price to Rs 2,450 apiece from Rs 2,400.
- Margin beat in a weak volume quarter.
- Early green shoots in demand but recovery likely to take time.
- Growth outlook clouded by transition to Bharat Stage VI emission norms.
CLSA
- Maintains ‘Sell' but hikes target price to Rs 2,500 apiece from Rs 2,350.
- Weak quarter but margin beat.
- Some demand improvement, but more regulatory pressures ahead.
- Margins unlikely to improve further with BS-VI costs around the corner.
Edelweiss
- Maintains ‘Hold' and hikes target price to Rs 2,963 a share from Rs 2,763.
- Company focusing to bring down dealer inventory levels to 30 days.
- Should benefit from the expected recovery in rural demand.
- Scope for market share gains remains challenging given lower growth.
- Estimates volume CAGR to remain flat over FY19–21 on weak demand.
Emkay
- Maintains ‘Hold' and cuts target price to Rs 3,150 from Rs 3,200.
- Expects revenue growth to moderate at 3 percent CAGR over FY19-22.
- Lower growth expected owing to continuing market share losses.
- Downside risks include weak macro environment and high competition.
SBI Cap
- Maintains ‘Hold' with a target price of Rs 2,350 apiece.
- Lower raw material costs drove strong beat on operating performance.
- Festive season retails growing at low single digits.
- Rural sentiments to revive from hereon led by better monsoons.
- Demand uncertainty post festivals remain.
- Estimates flat earnings over FY19-22 amid structural headwinds.
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