Hero Honda Ltd (updated - 20 April 2010)
Hero Honda beat forecasts by registering 49 per cent growth in net profit to Rs 599 crore during the fourth quarter ended March 2010. Revenues during the period rose 20 per cent to Rs 4,122 crore. The performance was aided by sales volumes which touched all-time highs, favourable product mix and lower tax rates.
Hero Honda notched up sales volumes of 1.18 units, up 19 per cent over the previous year’s quarter. Volumes for 2009-10 stood at 4.6 million, a growth of 24 per cent, in line with the overall market growth for two-wheelers. For 2010-11, the management estimates a more sedate 1215 per cent growth to about 5.1 million considering the high base of 2009-10.
Volume growth helped bring down raw material costs (as a percentage of sales) to 67.4 per cent from 68 per cent in the December quarter. Sales realisations, which improved by Rs 1,000 to Rs 34,000 per vehicle, also helped, as Hero Honda continued its efforts to skew volumes in favour of higher priced premium bikes. Earnings before interest, tax, depreciation and amortisation (Ebitda) margins, thus, improved by 126 basis points to 17.27 per cent year-on-year. Going ahead, the management believes that it will be able to maintain margins on the back of volume discounts from its supply chain.
At the net level, lower tax rates played a key role in helping the company register higher numbers. Thanks to the tax breaks at Haridwar, where it is currently manufacturing 1.4 million units, it had to pay only 21 per cent tax for FY10 compared with 28 per cent in the previous financial year. The company expects to avail these gains in the current financial year as it ramps up production at this plant.
At Rs 1,896, the stock is trading at 13.7 times FY11 earnings estimate of Rs 138.
source - business standard
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Hero Honda Ltd (updated - 10 Nov 2010)
Hero Honda recorded highest-ever sales in the September quarter at 505,553 units, up 43 per cent year-on-year (y-o-y). But the growth was lower than peers. The company continued to lose market share, which fell 150 basis points to around 48 per cent, according to Standard Chartered research.
With a price rise early in the quarter, the company saw realisations rise nearly three per cent. This boosted revenues by 12 per cent to over `4,500 crore, in line with estimates. Raw material costs increased 20 per cent and dragged earnings before interest, tax, depreciation and amortisation (Ebitda) margins by 500 basis points to 13.4 per cent.
Unlike competitors, Hero Honda hasn’t announced any further price rise to lower the impact of rising raw material costs after its solitary action early last quarter. This blurs the outlook and has led to several downgrades of 2010-11earnings estimates.
However, analysts said these pressures could be the result of the impending purchase of Honda’s stake by the Hero group promoters.
The stock, while underperforming the Sensex, has held up well and has risen 1.7 per cent during the last one month. Without the Honda badge, the brand may suffer domestically. But, opening up of the export market will help the company follow Bajaj Auto’s phenomenal trail in other emerging markets (including Africa and Latin America).
At `1,826.05, the stock trades at a price to earnings (PE) valuation of about 15x 2011-12 earnings per share estimates.
source - business standard
