ULJK Securities remained positive on Hero Honda Motors at the current market price of Rs 810.
The analysts at ULJK say that Hero Honda`s revenues were up 35.6% to Rs 3,2020 million in the second quarter, on account of increased distribution network, increased product line. During the quarter, the profit of the company rose 49.90% to Rs 3,063.00 million from Rs 2,043.30 million in the same quarter, previous year. The company reported earnings of Rs 15.34 a share during the quarter, registering 49.95% growth over prior year period. Its sales have increased in the deluxe and entry level segment; and its share in the premium bike segment has doubled to over 20%.
In Q1 Hero Honda saw volume growth of 11%. The analysts say that post the festive season the volume growth may not be as robust as the first half. They see similar growth trend as seen in first quarter in coming quarters, i.e volume growth of 10% in FY09. The company has showed good margin expansion of 119 bps, which came in at 13.58% versus 12.39% in the corresponding quarter previous year, on account of cost control and greater penetration in the market.
Hero Honda is the leader in the two wheeler segment with a market share of 55% and has been staying ahead of the competitors. The analysts believe that cooling of the raw material expenses will have a positive impact on the margins. The recent 100 bps repo rate cut and the earlier CRR cut will act in favour of the company, which could bring down the interest rates in future thus giving a boost to its sales. The environment has been challenging but the company has shown good performance in the second quarter not only with higher revenues but also increased margins. With increased distribution channels and strong product portfolio with new launches in high realization premium segment the company is better positioned as compared to its peers, analysts added.
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