Hero Honda Motors  (updated - 22 April 2009)
Despite a tough environment, Hero Honda did exceptionally well in 200809 ending the year with a market share in motorcycles of 57 per cent. The March quarter saw an increase in revenues of 22 per cent y-o-y and easing commodity prices helped the firm post an operating profit margin of 14.16 per cent.

The motorcycle market is becoming increasingly more competitive with peer Bajaj Auto rolling out several models and Honda Motorcycles and Scooters India (HMSI) entering the 100cc space. So it’s possible Hero Honda could lose some market share, though not anything very significant.

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Hero Honda Motors  (updated - Feb 2009)
With 60 per cent of its sales coming from rural markets and given a favourable monsoon and higher MSPs, Hero Honda is likely to grow faster than its peers. Its rural focus, a majority of sales done on cash basis and good performance of its mainstays Splendor and Passion helped the company tot up sales of nearly 30 lakh (9.6 per cent growth) for the first 10 months of FY09. Despite their smaller base and higher export sales, Bajaj Auto and TVS Motors have recorded a decline of 10 per cent and 4 per cent respectively, yielding significant market share to the two-wheeler leader in the process.

Given its pricing and the popularity of its bikes in the rural segment, the company may not fully pass on the benefits of lower raw material prices resulting in higher operating profit margins. Despite a dip in volumes (albeit marginally) in the December quarter, lower raw material costs, sales of premium bikes (Hunk, CBZ X-treme and Karizma) and tax breaks on its plant at Haridwar, has helped the company improve its EBIDTA and net margins on quarteron-quarter as well as year-on-year basis.

While the company’s rural focus will continue with Har Gaon, Har Aangan sales initiative, Hero Honda is also trying to expand its base in Tier-2 and Tier-3 cities by increasing its customer touch points to 3,500 from 3,000 currently. While it has outgunned its competition in every department and deserves a premium, the current price has already factored in these developments. Consider buying on dips
source - BS

Hero Honda Motors  (updated - 5 April 2009)
It’s been quite a splendid 2008-09 for Hero Honda with the two wheeler maker ending the year with a market share in motorcycles of 57 per cent and two wheeler volumes up 12 per cent over 2007-08. The company has grown above the industry rate, taking away market share from competitors; in the 100 cc entry segment for instance, it now commands a share of 80 per cent with Bajaj Auto consciously moving out of the space and other players not able to make an impact.

However, Honda Motorcycles and Scooters India(HMSI) is entering the entry segment and although the Hero Honda management doesn’t perceive any threat to its share, it could lose some ground. In the executive segment (125cc-150 cc), too, Hero Honda has gained share over the past year with models like the Splendor Plus continuing to do well. However, Bajaj Auto is now rolling out several new models —the XCD 135 cc has had a good start —-and Hero Honda needs to protect its 70 per cent share in this space perhaps with additional launches. The management has been guarded in its outlook for 2009-10 saying the quarters ahead could be tough since the economy is still not out of the woods. Moreover, financing has almost dried up though that typically hurts it less than it does players like Bajaj Auto. In short, the Hero Honda management sees single digit growth in volumes this year.

The company commands a strong presence in rural areas and despite the downturn in the economy, a strong product portfolio across the entry, executive and premium segments, should help it grow two wheeler volumes by about 8per cent in the current year. On a slightly smaller base last year, volumes were up 12 per cent. Hero Honda depends less on financing schemes to sell its bikes.

Moreover, the company has demonstrated that it has pricing power - it hasn’t always passed on the benefits of lower excise duties or lower raw material prices to customers. So it’s possible revenues this year could grow by about 7-8 per cent over the Rs 12,319 crore earned in 2008-09. With prices of steel easing, operating margins should sustain at current levels of 14 per cent. And with the company planning to scale up production at its Hardwar plant, the effective tax rate should be lower. That means the earnings per share (EPS) could grow at around 20 per cent this year over the Rs 64.19 posted last year.

The Hero Honda stock was one of the top performers of 2008 and since January, this year, has rallied smartly. At 1,100, the stock trades at around 14 times estimated 2009-10 earnings and is attractively valued.
source - BS

Despite that, operating margins should sustain at current levels of 14 per cent given that steel prices have fallen significantly as have prices for other raw materials and also because the management does not intend to pass on the cost benefits to buyers in the form of lower prices. The Hero Honda stock was one of the top performers of 2008 and since January, this year, has rallied smartly much like its peers in the auto space. At 1,029, however, the stock trades at close to15 times estimated 2009-10 earnings and leaves little cushioning for any unexpected weakness in demand.
source - BS

Hero Honda Motors      (updated - 30 July 2009)
In what’s supposed to be achallenging environment, Hero Honda has turned in a superb set of numbers for the June 2009 quarter. It’s not just that volumes were up 25 per cent; realisations have been strong because revenues have risen 34 per cent year-on-year to Rs 3,811 crore. In the just preceding March 2009 quarter, revenues had increased by 22 per cent.

The combination of a strong top line and easing commodity prices have helped push up operating profit margins by nearly 500 basis points year-onyear, driving up the operating profit by a remarkable 87 per cent and the profit after tax by 83 per cent. Sequentially, margins have risen by 220 basis point. The company had ended 2008-09 with the market share in motorcycles of 57 per cent which has gone up further to 59 per cent. Hero Honda appears to have cashed in on the wedding season — it has traditionally done well during that season especially in rural markets where it has a very strong presence. With such a firm grip on the market, especially in the 100cc entry segment, Bajaj Auto will find it hard to make a mark with its new 100cc launch. Of course, the entry of Honda Motorcycles and Scooters India (HMSI), into this space, couldpose some problems for Hero Honda but that’s still some time away.

In the meantime, going by the momentum in the June quarter, volumes in the current year could go up by at least 12-13 per cent; last year on a smaller base, they grew by 12 per cent. Hero Honda depends less on financing schemes to sell its bikes than some of its competitors and going by the June quarter numbers, it has pricing power too. Which means revenues could increase by at least 20 per cent over the Rs 12,319 crore posted last year.

With operating profit margins expected to sustain at levels of 16.5 per cent and tax benefits net profits could rise by about 50 per cent, say analysts. Among the top performers in 2008, the stock has risen 102 per cent since the start of the year, compared with again for the Sensex of about 50 per cent. At Rs 1,640, the stock trades at around 16.5 times estimated 2009-10 earnings and is attractively valued.
source - BS

Hero Honda Motors         (updated - 09 Sept 2009)
Given its strong brands and distribution network, its not surprising that Hero Honda continues to turn in good performances. However, analysts believe that at least 60,000-70,000 vehicles of the total of of 4.15 lakh twowheelers despatched in August, would be stocks in the pipeline for the festive season beginning at the end of September. Nevertheless, sales at the retail end should have been higher than the 3.4 lakh posted in July.

While the less-than-normal monsoon hasnt impacted Hero Hondas business as yet, its possible sales could slow down if the winter rain doesnt arrive on time or isnt sufficient. The company has benefited from high rural incomes -- a fairly high proportion of Hero Hondas sales of close to 60 per cent is derived from rural markets.

But a weak winter monsoon could result in sales tapering off somewhat, though the wedding season should partly compensate for that.

Also, while Hero Honda currently commands a market share of 59 per cent for motorcycles and has a firm grip on the 100cc entry segment, Bajaj Auto, which recently reentered the space, has done well to sell 48,000 vehicles in the very first month.
Nevertheless, Hero Honda plans to go ahead with launches of upgrades of some of its models in the next six months and with the economy on the mend, volumes in the current year should go up by about 10-12 per cent; they were up 12 per cent on a smaller base last year.

Given its pricing power, revenues, analysts estimate, could increase by at least 1718 per cent over the Rs 12,319 crore posted last year. In the June 2009 quarter, revenues increased 34 per cent year-onyear to Rs 3,811 crore. Lower raw material costs should help operating profit margins sustain at levels of 16.5 per cent. At the current price of Rs 1,668, the stock trades at 18 times estimated 2009-10 earnings which is not cheap.
source - BS

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         Hero Honda Motors

Hero Honda Motors         (updated - 22 Oct 2009)
Good times are here for two-wheeler makers with the country’s largest motorcycle maker, Hero Honda, reporting a 27 per cent year-on-year (y-o-y) jump in revenues on the back of a 22 per cent rise in volumes and lower excise duties. Its rural reach, existing top sellers and festive demand helped the company ensure sales of over a million bikes for the second quarter in a row and helped it maintain a 59 per cent market share in the motorcycle segment.

While the top line was marginally below expectations, the launch of new models at the top-end and efficient operations helped push up operating profit margins by nearly 500 basis points to 18 per cent. Higher sales helped the company improve its margins as raw material costs grew at a slower pace of 15 per cent year-on-year.

Analysts say that raw material costs have lately gone up 10 per cent or more over the quarter and expect margins to taper down as there has been no price increases so far. Volume growth and higher sales in the premium segment will be the only way the company will be able to maintain its margins. But with the festive season drawing to a close and new models launched only recently, maintaining margins will be atough ask.

Higher revenue growth and lower taxes helped push net profit to Rs 597 crore -- up 95 per cent yearon-year. The tax bracket at 31 per cent (September quarter, FY09) is substantially down to 22 per cent as the company manufactures a significant number of bikes at the tax free zone at Haridwar. The company will enjoy this tax-free status for the next five years. Though the market was expecting stellar results (announced after market hours), rising raw material costs going ahead is a dampener.

The stock lost nearly 3 per cent to close at Rs 1,612.90 on Wednesday and is trading at 16 times its current fiscal earnings of Rs 100, indicating that there is limited scope for appreciation from these levels over the next six months.