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Dolat Capital Report
Hero MotoCorp Ltd. printed an improved margin performance in Q2 led by softening commodity prices and benefit of operating leverage. Gross profit per vehicle increased 5.5% QoQ on product mix, Ebitda margin expanded by 30 basis points QoQ to 14.1%.
Hero MotoCorp's management indicated strong festive season sale still date (+15% YoY) and anticipate momentum continue to be strong. Rural demand is picking up with revival in demand of the entry level segment, HF Deluxe and Passion is showing strong growth.
Booking are strong for recently launched models Harley Davidson - X440 and Karizma XMR. We expect a sharp rampup in volume of 10,000-12,000 per month from CY24.
Considering pickup in rural demand and Harley volume, healthy dividend yield (~3.7%) and compelling valuation 14 times FY25E, we continue to remain positive on the stock.
We forecast 22% earnings per share compound annual growth rate over FY23-26E.
Maintain 'Buy' with target price of Rs 3901 (16 times September-25E EPS).
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