Q4 FY18 Result Update: Hero MotoCorp - BUY - TP Rs.4553 - Kotak

HMC's 4QFY18 reported financials grew strongly over 4QFY17. Pick-up in rural demand benefitted motorcycle demand and the same reflected in 23% YoY volume growth reported by HMC.

- HMC reported 23.7% growth in revenues, 43% growth in EBITDA and 35% growth in PAT. In 4QFY17, HMC's performance was impacted by one-off cost (Rs1.93bn) related to discounts given to clear BSIII inventory ahead of Supreme Court decision. Adjusted for one-off, PAT growth is 13% YoY. Despite commodity cost pressure, company was able to maintain its gross margin; though higher other expenses impacted EBITDA margin.

- Pick-up in rural demand is aiding growth in the motorcycle segment. With high presence in rural areas, HMC stands to benefit from this. Prediction of normal monsoon is expected to support growth momentum in the motorcycle segment. There are certain headwinds to EBITDA margins, but we believe that HMC has levers to gradually counter pressure on EBITDA margin. At the CMP of Rs3,664, the stock is trading at a PE of 17.7x on FY19E and 16x on FY20E earnings. We retain BUY on the stock with revised price target of Rs4,353 (earlier 4,228). We value the stock at a PE of 19x (unchanged) on FY20E earnings.

Shares of HERO MOTOCORP LTD. was last trading in BSE at Rs.3659.8 as compared to the previous close of Rs. 3657.1. The total number of shares traded during the day was 58004 in over 665 trades.

The stock hit an intraday high of Rs. 3669.95 and intraday low of 3648.05. The net turnover during the day was Rs. 212283090.

Source : Equity Bulls

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