Hero MotoCorp shares zoom as Q4 numbers beat Street estimates

Hero MotoCorp shares gained 1.2 percent in the opening hour of trade on Friday after the company announced its fourth-quarter results. The stock recovered most of its lost ground since its disappointing April-sales numbers, when both domestic and export volumes reflected a slump in demand.

The Hero MotoCorp stock was trading at Rs 2,544 at 9.45am on the on BSE.

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The two-wheeler maker beat Street estimates with its net profit up 37 percent YoY to Rs 859 crore and revenue rising 12 percent to Rs 8,307 crore. It declared a dividend of Rs 35 per share which, when added to the interim divided of Rs 65 announced in February 2023, brings the total dividend for the fiscal to Rs 100. Net profit for FY23 went up 19 percent to Rs 3,875 crore and revenue surged 16 percent to Rs 33,806 crore.

Its fourth-quarter numbers reflected improved pricing power. In a report following the quarterly results, Jefferies’ analysts stated that the company’s EBITDA/vehicle had touched a new high at Rs 8,524. It was up 22 percent YoY and 14 percent percent QoQ. The brokerage has a ‘buy’ rating on the stock with a target price of Rs 3,000.

In an exchange filing, the company stated that its overall EBIDTA margin for the quarter was at 13.0 percent, “reflecting an improvement of 190 bps y/y basis, driven by lower commodity costs, higher savings, and judicious price increases”.

Also read: Hero MotoCorp’s Q4FY23 results| Net sales at Rs 8,434 crore, up 12.5 percent YoY

Brokerages, which have a ‘sell’ rating on the call, pegged the surprising bottomline growth to other investments and favourable seasonality.

UBS, which has a ‘sell’ rating on the stock with a target price of Rs 2,400, stated the fourth-quarter operating profit beat consensus, driven by 144 bps expansion in the gross margin. The net profit beat estimates too but that the analysts believe was potentially aided by higher income on investments. Revenue growth was largely in line-with their estimates.

Goldman Sachs, which has a ‘sell’ rating on the stock with a target price of Rs 2,170, stated that the numbers exceed estimates on better operating leverage and favourable seasonality.

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