8 August 2016
1QFY17 Results Update | Sector: Automobiles
Hero MotoCorp
EBITDA margin in line at 16.6%, hits
Motilal Oswal values your support in
the Asiamoney Brokers Poll 2016 for
given rich valuations
India Research, Sales and Trading team.
Volume growth drives revenues;
We
request your ballot.
BSE SENSEX
28,183
S&P CNX
8,711
CMP: INR3,457 TP: INR3,666 (+6%)
Downgrade to Neutral
six-year high; Downgrading to Neutral
adverse mix drags realizations:
Hero
MotoCorp’s (HMCL) net revenues grew 7% YoY to INR73.9b (est. of INR77.8b)
due to strong volume growth of ~6% YoY (+1.4% QoQ). Realizations declined
3% QoQ (+1% YoY), impacted by adverse mix and lower spares sales of
~INR42.4k (est. of ~INR44.6k). EBITDA margins increased 70bp QoQ (+150bp
YoY) to 16.6% (est. of 16.3%), led by lower marketing spend. Adj. PAT rose
18% YoY to INR8.8b (est. of ~INR9.1b).
Earnings call highlights:
a) HMCL expects double-digit growth in 2QFY17 and
high-single-digit growth in 2HFY17. b) Medium-term EBITDA margins guided at
14-16% (v/s 14-15% earlier). c) Gujarat plant expected to be commissioned in
Sept-16 (v/s July-16 earlier). d) According to management, GST rate lower
than 23-24% would be beneficial to the mass market segment. e) CBS/ABS to
be mandatory from Apr-18 (Apr-17 for new products), which will result in cost
increase of up to INR4,000/unit for motorcycles. Scooters would have
relatively low impact as they already have CBS technology.
Valuation and view:
Despite factoring in strong volume growth (8.5%/11.5%
in FY17/18), stable EBITDA margins (at 16.5% for FY18E) and resultant strong
EPS growth (~18% in FY18E), valuations at ~18.9x/16.1x FY17/18E appear
fairly valued considering loss of excise benefit from FY19. We downgrade the
stock to
Neutral
from Buy with a target price of INR3,666 (18x FY18E EPS
adjusted for loss of excise benefit— at ~15% premium to LPA).
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm/ Vol m
Free float (%)
HMCL IN
199.7
690.3 / 10.3
3,554/2,259
5/17/30
1101
65.4
Financials & Valuations (INR b)
2016 2017E 2018E
Y/E Mar
284.4 314.6 360.0
Net Sales
44.6
51.3
59.4
EBITDA
31.6
36.6
42.9
PAT
158.3 183.0 214.7
EPS (INR)
26.6
15.6
17.3
Gr. (%)
397.8 484.5 590.7
BV/Sh (INR)
43.6
41.5
39.9
RoE (%)
42.9
40.5
39.1
RoCE (%)
21.8
18.9
16.1
P/E (x)
8.7
7.1
5.9
P/BV (x)
Estimate change
TP change
Rating change
Quarterly Performance (Consolidated)
Y/E March
Total Volumes ('000 nos)
Growth YoY (%)
Net Realization
Growth YoY (%)
Net Op Revenues
Change (%)
RM Cost (% sales)
Staff Cost (% sales)
Other Exp (% sales)
EBITDA
EBITDA Margins (%)
Other Income
Interest
Depreciation
PBT
Effective Tax Rate (%)
Adj. PAT
Growth (%)
E: MOSL Estimates
1Q
1,646
-4.1
41,960
2.3
69,048
-1.9
69.7
4.5
10.7
10,420
15.1
1,044
12
1,030
10,422
28.3
7,475
32.8
(INR Million)
FY16
FY17
4Q
1,722
9.3
43,595
1.1
75,052
10.5
66.0
4.7
13.4
11,919
15.9
1,168
12
1,155
11,920
30.0
8,347
32.2
1Q
1,745
6.1
42,391
1.0
73,989
7.2
67.1
4.5
11.7
12,301
16.6
1,204
15
1,152
12,337
28.4
8,831
18.1
2Q
1,752
11.3
43,895
1.1
76,910
12.5
67.5
4.5
11.4
12,742
16.6
1,200
5
1,200
12,737
28.0
9,171
18.8
3Q
1,820
7.7
44,391
2.9
80,792
10.8
66.8
4.8
12.5
12,889
16.0
1,150
6
1,400
12,633
28.0
9,096
14.3
4Q
1,882
9.3
44,085
1.1
82,948
10.5
66.7
4.9
12.3
13,376
16.1
1,196
4
1,401
13,167
28.2
9,457
13.3
FY16
FY17E
3Q
1,690
2.5
43,159
4.0
72,948
6.7
66.9
4.7
12.7
11,399
15.6
842
6
1,139
11,096
28.3
7,958
36.5
1Q
1,745
6.1
-4.8
44,551
5.4
-4.8
77,758
11.8
67.6
-50bp
4.4
10bp
0bp
11.7
-2.8
12,659
16.3
30bp
14.6
1,050
6
150.0
-0.7
1,160
-1.6
12,543
27.4
100bp
-3.0
9,104
21.3
-320bp
Var.
(%)
0.0
2Q
1,575
-7.0
43,414
6.3
68,371
-1.1
68.2
4.5
11.4
10,834
15.8
1,026
5
1,091
10,764
28.3
7,721
1.1
6,632
7,199
0.0
8.5
42,886 43,706
3.1
1.9
284,427 314,639
3.1
10.6
67.9
67.0
4.6
4.7
11.8
12.0
44,603 51,308
15.7
16.3
4,229
4,750
49
30
4,414
5,153
44,369 50,875
28.7
28.1
31,615 36,555
24.4
15.6
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
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Hero MotoCorp
Higher sales volumes drive revenue growth; Realizations lend marginal
support
Strong volume growth of ~6% YoY (+1.4% QoQ), was driven by new launches in
the scooter segment. Besides motorcycle segment (~88% of total 2W volumes)
too supported with a 3.4% YoY growth (+6% QoQ), while scooter sale volumes
accelerated by 30% YoY(-22% QoQ). Push in scooter volumes mainly came from
incremental sales of Duet in 1QFY17 (~97,000 units).
HMCL lost domestic 2W market share by 220bp QoQ (-270bp YoY) to 37.6% in
1QFY17, pulled down by the scooter segment. Loss of 4.4pp respectively, in
scooters as well as its stronghold executive segment led to erosion of domestic
market share. Weak sales of Maestro QoQ led to fall in market share in the
scooter segment. Besides, stiff competition led to decline in market share in the
executive (-440bp) and economy segment (-370bp).
Realizations declined 3% (+1% YoY) impacted due to adverse mix and lower
spare sales to ~INR 42.4k (v/s est ~INR44.6k).
As a result, net revenues grew by 7% YoY to INR73.9b (est INR77.8b).
Exhibit 2: Realizations growth driven by price hikes and
product mix
Exhibit 1: Overall growth driven by incremental scooter
volumes
Volumes ('000 units)
19.5
7.4
6.9
-1.0-2.8
-5.1
6.3
4.1
10.0
2.5
-1.9-0.9
-4.1
-7.0
9.3
6.1
Growth (%)
-13.7
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
FY13
FY14
FY15
FY16
FY17
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
FY13
FY14
FY15
FY16
FY17
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: Trend in Segment Mix ('000 units)
Total Motorcycles
% of total
Scooters
% of total
Total 2Ws
Of which exports
% of total
1QFY17
1,527
87.5
219
12.5
1,745
39
2.2
1QFY16
1,477
89.7
169
10.3
1,646
45
2.8
YoY %
3.4
29.6
6.0
(14)
4QFY16
1,441
83.7
281
16.3
1,721
54
3.2
QoQ %
6.0
-22.0
1.4
-28.4
FY16
5,736
86.5
896
13.5
6,632
210
2.8
FY15
5,800
87.5
832
12.5
6,632
200
3.0
YoY %
-1.1
7.7
0.0
5
2.2
Source: Company, MOSL
8 August 2016
2

Hero MotoCorp
Exhibit 4: Share of Executive segment picks up as rural economy revives; Scooters decline
as competition heats up
Economy
10
12
57
20
10
13
56
17
11
12
56
17
11
11
57
18
Executive 100
12
14
52
18
11
13
59
15
12
13
56
18
Executive 125
11
14
56
16
10
13
57
18
12
10
58
18
Premium
13
9
60
17
9
11
61
17
10
12
58
18
Scooters
15
10
54
18
16
11
52
20
12
13
53
20
Source: Company, MOSL
Exhibit 5: Scooters and Executive segments pull down domestic market share
Segment
Economy
Executive - 100
Executive - 125
Premium
Dom. Motorcycles
Dom. Scooters
Total 2W (Domestic)
1QFY17
51.4
81.3
45.6
3.3
50.6
15.4
37.6
1QFY16
43.8
86.3
38.5
4.9
53.5
13.8
40.3
Chg YoY (BP)
760
-500
710
-160
-290
160
-270
4QFY16
55.1
85.7
43.9
3.5
52.5
19.8
39.8
Chg QoQ (BP)
-370
-440
170
-20
-180
-440
-220
Source: Company, MOSL
Lower other expenses, drive EBITDA margins to 16.6%
Gross margins contracted 110bp QoQ (+260bp YoY) to 33% due to commodity
costs hardened QoQ (steel and aluminum) and adverse product mix.
EBITDA at INR12.3b (v/s est. INR 12.6b) was up ~18% YoY (+3% QoQ).
EBITDA margins came in at 16.6% (v/s est 16.3%), an increase of 70bp QoQ
(+150bp YoY) as other expenses declined 170bp on account of lower marketing
spends. Besides higher RM costs QoQ (+110bp) limited upside in margins.
Higher depreciation and tax restricted adj PAT to INR8.8b (v/s est ~INR9.1b)
increase of 18% YoY.
Exhibit 7: EBITDA/unit improves by 18%
EBITDA (INR/unit)
Exhibit 6: Lower other expenses boosts EBITDA margins
EBITDA (INR m)
13.5
11.6 10.5 10.0 10.5 10.6
EBITDA Margins (%)
16.6
15.1 15.8 15.6 15.9
12.0 12.3
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
FY14
FY15
FY16
FY17
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
FY14
FY15
FY16
FY17
Source: Company, MOSL
Source: Company, MOSL
8 August 2016
3

Hero MotoCorp
Key takeaways from management interaction
Outlook positive for 2HFY17:
It expects double digit growth in 2QFY17 and
higher single digit growth in 2HFY17.Urban market is performing better at
present but trend is likely to shift to rural growth during 2HFY17
Retails growth
of ~6% was tad lower than dispatches. Rural growth was ~7%
YTD. Sales in Northern and Central India were slightly weaker due to a weak
marriage season. Scooter retails stood at ~70k units, which was steady since the
past 4-5 months.
EBITDA margin guidance:
Management has guided EBITDA margins to be in the
range of 14-16% (v/s 14-15% earlier).
Commodity costs
increased QoQ due to steel and aluminum price increase and
mix impact. The management expects to see marginal cost pressure going
forward.
Gujarat Plant
is expected to be commissioned in Sept-16 (v/s earlier
commissioning date of July-16)
Price increase
in the range of INR 200-675 to taken from 6 May 2016 on all the
models. No price increases taken post that.
HMCL’s dealer inventory
stood at 4-4.5 weeks in July-16, with 1-1.5 weeks of
inventory in transit.
LEAP Cost Cutting Program
has delivered savings of ~INR450m in 1QFY17.
Haridwar plant
contributed ~36% of total volumes in 1QFY17.
Proportion of
First time buyers
was ~65% at present.
Exports:
Reviewing exports target of ~10% of volumes by FY20, as headwinds
are very strong in key target markets. Ongoing currency turmoil in countries like
Nigeria, Argentina, Mexico etc has delayed HMCL’s export plans. Its plans to
enter Argentina and Ghana in the next quarter and Mexico in 4QFY17.Depsite
weak environment, it has set a target of 300,000 units for FY17.
Capex:
It is planning for capex of ~INR8-9b in FY17.
Hero FinCorp (financing arm where it has ~48.5% stake)
is the largest financier
of HMCL 2Ws. Average monthly run rate of 35-40k units/ month of financing
done by the company.
CBS/ABS
to be mandatory from Apr-18(Apr-17 for new products). It estimates
an impact of ~INR4000/unit. Scooters are likely to have a relatively lower impact
as most scooters already have CBS technology. This would in turn boost
sccoterization in the future.
IND AS:
Trade discounts given to dealers are netted from revenues as against
the earlier practice of accounting in other expenses.
GST impact:
As per the management, any GST rate lower than 23-24% would be
beneficial to the mass market segment.
Valuation and view
Industry growth to rebound with pick up in 2HFY17:
Domestic 2W industry is
expected to witness recovery in FY17 on assumption of a normal monsoon.
2HFY17 is likely to be driven by rural growth. With ~ 50% of sales coming from
rural markets, we believe Hero is likely to benefit with strong brand equity in the
economy and executive 100 and 125 segments along with increasing share in
the scooter segment.
8 August 2016
4

Hero MotoCorp
Cost cutting potential high, rising raw material costs possible hinderance:
HMCL’s cost cutting initiative under project ‘Leap 20’ is focused at driving
significant improvements in cost structure, with simultaneous improvement in
product quality and reliability. The management is targeting ~90bp savings in
FY17, with further scope to save cost. However rising raw material costs could
hold further margin expansion. We estimate margins to remain stable at ~15.7%
in FY18E.
Export market to offer huge headroom for growth, but scale-up would be
challenge:
HMCL plans to double its target export markets from currently 20 to
40 countries over next few years. While motorcycle exports to emerging market
is a huge opportunity (~2x of India market), HMCL being one of the last entrant
could find it difficult to compete against incumbents (especially Bajaj Auto) due
to limited scope to differently position its product. This coupled with turmoil in
currencies of these markets would make entry and ramp-up even more difficult.
Valuations fair, downgrade to Neutral:
Despite factoring in for strong volume
growth (8.5%/11.5% in FY17/18), stable EBITDA margins (at 16.5% for FY18E),
and resultant strong EPS growth (~18% in FY18E), valuations at ~18.9x/16.1x
FY17/18E appear fairly valued considering loss of excise benefit from FY19. We
downgrade the stock to
Neutral
from Buy with a target price of INR3,666 (18x
FY18E EPS adjusted for loss of excise benefit— at ~15% premium to LPA).
15 Yrs Avg(x)
10 Yrs Avg(x)
P/B (x)
5 Yrs Avg(x)
15 Yrs Avg(x)
10 Yrs Avg(x)
Exhibit 8: Valuations trading at historical average, reflecting improving fundamentals
30
P/E (x)
5 Yrs Avg(x)
16.0
12.0
16.6
8.0
20
15.5
10
17.2
6.9
6.9
6.5
14.0
4.0
6.2
0
0.0
Source: MOSL
Source: MOSL
Exhibit 9: Comparative Valuation
Auto OEM's
Bajaj Auto
Hero MotoCorp
TVS Motor
M&M
Maruti Suzuki
Tata Motors
Ashok Leyland
Eicher Motors
Auto Ancillaries
Bharat Forge
Exide Industries
Amara Raja Batteries
BOSCH
CMP
(INR)*
2,873
3,457
304
1,497
4,992
514
89
22,441
826
174
928
25,430
Rating
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
TP
(INR)
2,944
3,666
323
1,724
5,509
558
118
27,244
921
205
1,032
24,766
P/E (x)
FY17E
FY18E
20.1
16.4
18.9
16.1
24.8
18.9
20.5
15.7
22.7
18.1
14.0
9.1
13.7
10.5
36.2
26.7
30.1
19.5
25.8
46.2
22.4
16.9
21.1
36.2
EV/EBITDA (x)
FY17E
FY18E
14.0
11.5
12.3
10.4
15.0
11.7
16.1
13.2
13.2
11.0
4.5
3.6
7.6
6.0
29.0
23.6
15.1
12.3
15.6
31.6
RoE (%)
FY17E
FY18E
31.2
33.0
41.5
39.9
27.1
28.7
15.6
17.8
20.3
21.6
14.5
19.2
29.8
31.0
40.9
40.1
RoCE (%)
FY17E
FY18E
30.4
32.2
40.5
39.1
28.0
30.2
13.0
15.1
27.6
28.9
12.2
14.2
21.9
25.2
26.1
27.9
12.3
16.9
20.0
11.6
14.5
10.7
15.3
15.5
15.8
16.2
13.1
26.0
25.6
24.7
24.6
26.6
19.3
21.2
27.6
28.2
# Nos. are on CY basis
Source: Company, MOSL
8 August 2016
5

Hero MotoCorp
Story in charts: EPS CAGR of ~16% over FY16-18E
Exhibit 10: Adding capacity ahead of growth
Capacity ('000 units)
97
98
100
96
96
88
86
85
-2.6
Exhibit 11: Recovery in volumes driven by scooters and rural
recovery
Volumes ('000 units)
23.6
17.4
15.4
6.2
0.0
8.5
11.6
Volume growth (%)
Cap. Utilization (%)
95
2.8
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E
Source: Company, MOSL
FY10
FY11
FY12
FY13
FY14
FY15
FY16 FY17E FY18E
Source: Company, MOSL
Exhibit 12: EBITDA margins to remain steady
EBITDA (INR b)
16.9
12.5
11.8
12.1
EBITDA Margin (%)
16.5
15.7 16.3
10.2 10.6
Exhibit 13: PAT to rise on robust growth
PAT (INR b)
19.4
18.4
Growth (%)
26.6 15.6
17.3
-0.4
-10.8
-10.9
26.6 26.1 36.2 32.8 35.4 35.4 44.6 51.3 59.4
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 14: Return ratios to remain healthy…
RoCE (%)
RoE (%)
Exhibit 15: …as cash levels rise further
Net Cash (INR b)
64
74
50
54
58
61
Net Cash (% of Cap Emp)
65.6
41.4
FY12
36.5
37
43.6 41.5
39.8
41.1
39.9
45.6 38.3
42.9
41.1
40.5
39.1
FY14
FY15
FY16
FY17E
FY18E
23
35
42
33
44
57
73
FY13
Source: Company, MOSL
Source: Company, MOSL
8 August 2016
6

Hero MotoCorp
Exhibit 16: Snapshot of Revenue Model
000 units
Total M/Cycles
Growth (%)
% of total volumes
Total Scooters
Growth (%)
% of total volumes
Total volumes
Growth (%)
- of which Exports
% of total volumes
Avg. Net Realn (INR/unit)
Growth (%)
Net Revenues (INR b)
Growth (%)
FY11
5,041
14.9
93.3
361
68.7
6.7
5,402
17.4
0
0.0
35,624
4.0
192
22.1
FY12
5,780
14.7
92.7
456
26.0
7.3
6,235
15.4
0
0.0
37,478
5.2
234
21.4
FY13
5,501
-4.8
90.5
574
26.1
9.5
6,076
-2.6
0
0.0
38,816
3.6
236
0.9
FY14
5,538
0.7
88.7
708
23.2
11.3
6,246
2.8
113
2.0
40,226
3.6
251
6.5
FY15
5,800
4.7
87.5
832
1758.1
12.5
6,632
6.2
120
2.0
41,242
2.5
274
8.9
FY16E
5,736
-1.1
86.5
896
772.7
13.5
6,632
0.0
133
2.2
42,220
2.4
280
2.4
FY17E
6,079
6.0
84.4
1,120
25.0
15.6
7,199
8.5
139
2.1
43,081
2.0
310
10.8
FY18E
6,742
10.9
84.0
1,288
15.0
16.0
8,031
11.6
209
2.9
43,988
2.1
353
13.9
Source: Company, MOSL
8 August 2016
7

Hero MotoCorp
Financials and Valuations
Income Statement
Y/E March
Volumes ('000)
Volume Growth (%)
Less: Excise
Net Revenues
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest cost
Other Income
Non-recurring Expense
PBT
Tax
Effective Tax Rate (%)
PAT
Change (%)
% of Net Sales
Adj. PAT
Change (%)
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Deferred Tax
Loans
Capital Employed
Application of Funds
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Curr.Assets, L & Adv.
Inventory
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Others
Current Liab. & Prov.
Sundry Creditors
Other Liabilities
Provisions
Net Current Assets
Miscellaneous Expenditures
Application of Funds
E: MOSL Estimates
2012
6,235
15.4
0
235,790
21.6
36,188
15.3
10,973
25,214
213
3,646
0
28,647
4,866
17.0
23,781
23.4
10.1
23,781
19.4
2013
6,076
-2.6
0
237,681
0.8
32,845
13.8
11,418
21,427
119
3,984
0
25,292
4,110
16.3
21,182
-10.9
8.9
21,182
-10.9
2014
6,246
2.8
0
252,755
6.3
35,401
14.0
11,074
24,327
118
4,464
0
28,673
7,582
26.4
21,091
-0.4
8.3
21,091
-0.4
2015
6,632
6.2
0
275,853
9.1
35,422
12.8
5,400
30,022
111
4,927
1,550
33,288
9,432
28.3
23,856
13.1
8.6
24,968
18.4
2016
6,632
0.0
0
284,427
3.1
44,603
15.7
4,414
40,189
49
4,229
0
44,369
12,754
28.7
31,615
32.5
11.1
31,615
26.6
(INR Million)
2017E
2018E
7,199
8.5
0
314,639
10.6
51,308
16.3
5,153
46,155
30
4,750
0
50,875
14,320
28.1
36,555
15.6
11.6
36,555
15.6
8,031
11.6
0
359,968
14.4
59,402
16.5
5,542
53,860
30
5,313
0
59,143
16,275
27.5
42,868
17.3
11.9
42,868
17.3
(INR Million)
2018E
399
117,562
117,961
2,278
0
120,239
116,849
67,123
49,726
8,000
42,664
74,796
8,490
16,184
30,630
17,560
1,932
54,946
34,907
7,743
12,296
19,850
0
120,239
2012
399
42,499
42,898
2,083
17,143
62,124
63,083
25,228
37,855
388
39,643
21,003
6,756
2,723
768
10,092
664
36,765
22,932
2,933
10,901
-15,762
0
62,124
2013
399
49,663
50,062
1,324
3,022
54,408
67,355
36,645
30,710
621
36,238
28,848
6,368
6,650
1,810
13,336
683
42,008
18,733
8,876
14,399
-13,161
0
54,408
2014
399
55,599
55,999
0
245
56,243
69,089
46,657
22,433
8,541
40,888
28,052
6,696
9,206
1,175
10,277
699
44,730
22,906
5,881
15,943
-16,678
1,060
56,243
2015
399
65,014
65,413
0
313
65,727
81,140
52,013
29,127
7,126
31,541
36,688
8,155
13,896
1,593
11,845
1,200
39,490
28,419
3,075
7,997
-2,802
735
65,727
2016
399
79,048
79,448
2,278
0
81,725
93,349
56,427
36,921
7,500
42,664
36,322
6,730
12,828
1,314
13,919
1,532
41,682
27,669
5,181
8,832
-5,360
0
81,725
2017E
399
96,352
96,751
2,278
0
99,029
104,849
61,581
43,268
8,000
42,664
53,455
7,454
14,209
14,680
15,417
1,696
48,358
30,646
6,798
10,914
5,097
0
99,029
8 August 2016
8

Hero MotoCorp
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
EPS Growth (%)
Cash EPS
Book Value per Share
DPS
Payout (Incl. Div. Tax) %
Valuation (x)
P/E
EV/EBITDA
EV/Sales
Price to Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors (Days)
Working Capital (Days)
Asset Turnover (x)
Fixed Asset Turnover
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
Profit before Tax
Depreciation & Amort.
Direct Taxes Paid
(Inc)/Dec in Working Capital
Interest/Div. Received
Other Items
CF from Oper. Activity
Extra-ordinary Items
CF after EO Items
(Inc)/Dec in FA+CWIP
Free Cash Flow
(Pur)/Sale of Invest.
CF from Inv. Activity
Interest Paid
Dividends Paid
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2012
119.1
19.4
132.0
214.8
45.0
43.5
2013
106.1
-10.9
120.2
250.7
60.0
65.1
2014
105.6
-0.4
118.1
280.4
65.0
70.8
2015
125.0
18.4
146.5
327.6
60.0
57.8
2016
158.3
26.6
180.4
397.8
72.0
52.3
2017E
183.0
15.6
208.9
484.5
80.0
50.3
2018E
214.7
17.3
242.4
590.7
90.0
48.2
27.6
18.6
2.4
10.6
1.7
65.6
41.4
187.2
4
11
35
-24
3.8
4.0
0.4
45.6
36.5
96.8
11
10
29
-20
4.4
3.6
0.1
39.8
38.3
167.4
14
10
33
-24
4.5
3.7
0.0
41.1
41.1
138.3
19
11
38
-4
4.2
3.7
0.0
21.8
14.5
2.3
8.7
2.1
43.6
42.9
102.8
17
9
36
-7
3.5
3.3
0.0
18.9
12.3
2.0
7.1
2.3
41.5
40.5
103.7
17
9
36
6
3.2
3.2
0.0
16.1
10.4
1.7
5.9
2.6
39.9
39.1
107.5
17
9
35
20
3.0
3.2
0.0
(INR Million)
2018E
59,143
5,542
-16,275
1,197
30
49,637
0
49,637
-12,000
37,637
0
-12,000
-30
-21,657
-21,687
15,950
14,680
30,630
2012
28,647
10,973
-5,827
-6,906
-3,674
384
23,598
431
24,029
-5,034
18,564
5,962
928
-213
-24,369
-24,582
375
393
768
2013
25,292
11,418
-6,133
-7,872
-4,002
202
18,904
-5,943
12,961
-6,004
12,900
5,079
-925
-119
-10,444
-10,563
1,473
337
1,810
2014
28,673
11,074
-6,495
545
-4,446
284
29,634
511
30,145
-9,328
20,307
-6,866
-16,193
-118
-14,031
-14,149
-197
1,373
1,175
2015
33,288
5,400
-9,998
-3,359
-4737
356
20,950
2,163
23,113
-11,530
9,420
11,651
121
-111
-22,194
-22,305
928
664
1,592
2016
44,369
4,414
-12,754
1,965
49
38,043
0
38,043
-12,583
25,460
-11,123
-23,706
-49
-17,326
-17,375
-3,037
1,593
-1,445
2017E
50,875
5,153
-14,320
2,909
30
44,647
0
44,647
-12,000
32,647
0
-12,000
-30
-19,251
-19,281
13,366
1,314
14,680
8 August 2016
9

Hero MotoCorp
Corporate profile
Hero MotoCorp (HMCL), erstwhile JV between
Honda Corporation Japan and the Munjal family, is
the leader in domestic 2W market with ~41% share,
benefiting from a strong dealership network and
high penetration in the rural areas (~45% of sales)
as well. Post-split from Honda, Hero MotoCorp is
free to tap global opportunity in 2W.
Company description
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Jun-16
Promoter
DII
FII
Others
34.6
15.3
41.1
9.0
Mar-16
34.6
16.4
39.7
9.3
Jun-15
34.6
13.4
38.5
13.5
Source: Capitaline
Exhibit 3: Top holders
Holder Name
LIC of India
Lathe Investment PTE Ltd
Oppenheimer International Growth Fund
Aberdeen Global Indian Equity Ltd.
Lazard Management LLC A/c
Emerging Markets Portfolio
Lazard
% Holding
5.4
2.8
2.7
1.7
1.7
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Pawan Munjal
Sunil Kant Munjal
Ramni Sood
Designation
CMD & CEO
Joint Managing Director
Company Secretary
Exhibit 5: Directors
Name
Anand C Burman
Paul Edgerley
Pritam Singh
Shobana Kamineni
V P Malik
Name
Meleveetil Damodaran
Pradeep Dinodia
Ravi Nath
Suman Kant Munjal
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Deloitte Haskins & Sells
JRA & Associates
KPMG
PricewaterhouseCoopers
Type
Statutory
Internal
Internal
Internal
Source: Capitaline
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
183.0
214.7
Consensus
forecast
173.8
193.5
Variation (%)
5.3
10.9
Source: Bloomberg
8 August 2016
10

HERO MOTOCORP GALLERY
HERO MOTOCORP
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