Buy Hero MotoCorp, target price Rs 2,200: Investec Securities

Investec Securities has upgraded Hero MotoCorp to buy from hold and cut target price to Rs 2,200 from Rs 2,400. Shares of Hero MotoCorp ended down 6.5 per cent at Rs 1,551.80 on Monday while the BSE Sensex closed 1375.27 points down (-4.61 per cent) at 28,440.32.

Hero MotoCorp Ltd., incorporated in 1984, has a market cap of Rs 30995.56 crore.

Investment Rationale

Hero MotoCorp with its high rural exposure, should benefit from the prospect of relatively strong rural demand, said Investec. This also makes the company less vulnerable to the impact of likely slower discretionary spend as an aftermath of Covid-19, said Investec.

Financials

Hero MotoCorp's key products/revenue segments include Motorised Two Wheelers upto 350cc Engine Capacity which contributed Rs 29693.52 crore to sales value (88.24 per cent of total sales); Spares (Two Wheelers) which contributed Rs 2835.97 crore to sales value (8.42 per cent of total sales); Sale of services which contributed Rs 595.04 crore to sales value (1.76 per cent of total sales) and Other Operating Revenue which contributed Rs 526.01 crore to sales value (1.56 per cent of total sales)for the year ending March 31, 2019.

For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 7074.53 crore, down -7.65 per cent from last quarter sales of Rs 7660.27 crore and down -10.87 per cent from last year same quarter sales of Rs 7936.88 crore. The company reported net profit after tax of Rs 880.13 crore in the latest quarter.