Analysts See Rural Demand Revival, Starts in Support; stick falls

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Analysts expect Hero MotoCorp Ltd. will benefit from a revival in rural demand, peak sales, new launches, a focus on exports and a successful execution of the EV strategy.

That comes despite India’s biggest two-wheeler maker reporting a 28% year-on-year decline in its standalone net profit for the quarter to March. The bottom line also fell 8.6% sequentially. Nevertheless, the income corresponds to the estimates.

Q4 FY22 Highlights (YoY)

  • Turnover fell 15% to Rs 7,421 crore.

  • EBITDA fell 32% to Rs 828 crore.

  • The EBITDA margin fell from 13.90% to 11.2%.

“With the economy picking up, we expect demand for motorcycles and scooters to trend positively in the coming months,” said Niranjan Gupta, chief financial officer at Hero MotoCorp Ltd., in a post-earnings call on Tuesday, as input costs continue to be high remain a challenge, we will continue to monitor the situation and take appropriate action as necessary.”

Forecasting a normal monsoon, he says, will likely support the harvest, which in turn should improve cash flows in the rural sector. “All of these factors are likely to contribute to a steady recovery in consumer sentiment and market demand.”

Shares of the company rose 1.3% in early trade but reversed all gains to trade 2.3% lower as of 10:30 a.m. Wednesday.

Of the 51 analysts covering the company, 33 recommend a “buy,” 13 recommend a “hold,” and five recommend a “sell,” according to Bloomberg data. The average of the 12-month consensus price target implies an upside potential of 18.7%.

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