Hero Honda’s latest research report by Emkay Global Financial Services is given below for serious investors, please have a look before invesring…….
Emkay Global Financial Services is bearish on Hero Honda Motors stock.
Current Market Price (CMP) is Rs 1663
Target set by Emkay is Rs 1590
Emkay Global Financial Services research report is as follows :-
Hero Honda Motors, capacity increased by debottlenecking, revised capacity stands at about 6.2 million units. There is further scope of increasing capacity. Royalty is a fixed expense to be paid by 2014. Our est. indicates a royalty outgo of Rs 1.9 billion to Rs 2.1 billion in FY12- FY14. Cost pressures are significant due to metal prices. 4QFY11/1QFY12 to have higher adv. spends due to World cup/IPL. Raise FY12 vol. est. to 6.1 million units (+3.6%) and EPS to Rs 113.8 (+3.7%). Expect FY12 DPS of Rs 68 (earlier Rs 30). Expect negative surprises on the earnings. Current valuations (FY12e PER/EV-EBIDTA of 14.9x/10.5x) do not factor in such risks.
At Rs 1,663, the stock trades at PER of 14.7 and EV/EBIDTA of 10.5 our FY12 estimates respectively. We have upgraded our FY12 volumes and EPS by 3.6% and 3.7% respectively. We believe that there are no major concerns for the company on the volumes front given the superior franchise and brand equity. However, we continue to have concerns with respect to cost pressures and clarity with respect to R&D efforts. Hence we value the company at 10% discount to Bajaj Auto. We have valued the company at 14 PER and 9.7x EV/EBIDTA with a target price of Rs 1,590 (up 3%). We retain our REDUCE rating on the stock as current valuations are not factoring in the risk of negative surprises on the margins front,” says Emkay Global Financial Services research report.
Share’s Data :-
BSE Code : 500182
Market Cap : Rs 33,220.10 Crores
Hero Honda Motors Ltd. share’s CMP is Rs 1,663.50 on 8th Apr 2011.
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