Recommendation: buy
Target Price: Rs3,200
Hero Motocorp experienced a sharp decline in sales volume for the March 2022 quarter. Sales were down 24% from the prior year quarter and 8% sequentially. While price increases may offset some pressures from soaring input costs, they are unlikely to dampen revenues. The company’s revenue could decline by 15.2% compared to the year-ago quarter.
EBITDA margins could contract 195 basis points year-over-year to 12.0%, although improved spare parts revenue share could keep the sequential decline to 18 basis points base.
Weak revenues along with negative operating leverage could lead to a 27.6% decline in after-tax profit compared to the prior year quarter.
Important management information to monitor:
- Demand outlook across all segments and markets
- Update on plans to launch its own electric scooter
- Production Cost Inflation Trends, Expected Pricing Action and Margin Levers
|
million rupees |
March 2022 estimates |
Annual change |
QoQ change |
| Revenue | 73,621 | (15.2)% | (6.6)% |
| EBITDA | 8,832 | (27.1)% | (8.0)% |
| Profit after tax | 6,260 | (27.6)% | (8.8)% |
Source: IIFL Research
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