Buy Hero Motocorp – TP Rs.2050 - Geojit BNP Paribas Financial Services Limited

Company's 3QFY12 revenue increase at 17% yoy and EBITDA at 31% yoy are in line with market expectations.

EBITDA margin at 15.8% up 170 bps yoy and 10 bps down qoq has also been line with market estimates.

Company could offset higher raw material cost by lower other operating expenses.

Depreciation increase of 7% is due to weakness in rupee against JPY.

Domestic motorcycle volume increased 11% yoy against industry growth rate of 9%, translating in to market share gain of 125 bps yoy.

Company showed healthy improvement in all operating parameters yoy. Sequentially, the margins are slightly down due to seasonality and change in product mix.

4QFY12 volume growth is expected to be similar to that of 3Q.

Honda's entry in to 100 cc bikes has been a significant overhang on the stock. However, the brand equity and distribution edge enjoyed by the company would help limit market share loss.

Market share gain in 125 cc bikes and scooter segment will limit the market share loss in the two-wheeler segment.

Source : Equity Bulls

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