Hero MotoCorp Share Price Target Q4FY24 Results: Rs 1,016 Cr Profit Should you Buy, Sell or Hold?
Hero MotoCorp Share Price: Hero MotoCorp, a leading player in the two-wheeler (2W) industry, has set an ambitious target price of Rs 5,530 per share, maintaining a ‘BUY’ rating, according to a recent report by Axis Securities. This target price suggests a promising 20% upside from its current market price (CMP) of Rs 4,624, as of May 8, 2024.
For the fourth quarter of the fiscal year 2024 (Q4FY24), Hero MotoCorp posted a revenue of Rs 9,519 crore, showing a growth of 14.6% year-over-year (YoY), despite a 2% decline from the previous quarter.
The company’s EBITDA for the same period was Rs 1,359 crore, up 25.5% YoY, aligning closely with market estimates. The EBITDA margin stood at 14.3%, benefiting from lower raw material costs and strategic price hikes.
However, the Profit After Tax (PAT) was slightly below expectations, registering Rs 1,016 crore, a 3% miss due to lower other income but still up 18.3% YoY.
Strategic Initiatives and Growth Outlook
Hero MotoCorp strategy involves launching new products, especially in the premium 2W segment and the electric vehicle (EV) space. Noteworthy among the upcoming launches are the Zoom 125 and Zoom 160 models, aimed at capturing a significant market share in the growing premium category. The company is also focusing on expanding its ‘Premia’ stores, aiming to open 150 new outlets by FY25, and upgrading current stores to Hero 2.0 standards.
Looking forward, the company expects a compound annual growth rate (CAGR) in volumes of about 6.5% from FY24 to FY26, with particular focus on the 125cc and above segment, bolstered by an anticipated normal monsoon.
Valuation and Market Dynamics
Hero MotoCorp valuation is pegged at 21 times the core FY26 earnings per share (EPS), consistent with previous assessments. The financial analysis forecasts a solid continuation of the company’s performance with increasing net sales, EBITDA, and net profit projected for FY25 and FY26.
The final dividend recommended by the board stands at Rs 40 per share, reflecting a high payout ratio and underscoring the company’s confidence in its financial health.
Key Risks and Challenges
The report outlines potential risks including slower-than-expected demand from rural areas and challenges in scaling up the new 125cc segment and EV operations which could affect the company’s market valuation and growth projections.
| Results Update | 09th May 2024 |
|---|---|
| Recommendation | BUY |
| Target Price | Rs 5,530/share |
| Company | Hero MotoCorp |
| Sector | Auto |
| Net Sales | Rs 9,519 Cr |
| EBITDA | Rs 1,359 Cr |
| EBITDA Margin (%) | 14.3% |
| Reported Net Profit | Rs 1,016 Cr |
| Reported EPS (Rs) | Rs 50.8 |
| CMP (Rs) | 4,624 |
| Upside / Downside (%) | 20% |
| High / Low (Rs) | 4,979 / 2,572 |
| Market cap (Cr) | 92,450 |
| Shareholding (%) | Sep-23 |
| Promoter | 34.8 |
| FIIs | 26.8 |
| MFs / UTI | 12.5 |
| Others | 25.9 |
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