HERO MOTOCORP LTD - Quantamental Equity Research

Quantamental Equity Research on HERO MOTOCORP LTD | Release: 19 Feb 2019 16:33:21 UTC+05:30 | Reporting Currency: INR | Trading Currency: INR | Exchange:NSE/BSE NSE CODE:HEROMOTOCO and BSE CODE:500182
Last Close:  INR 2799.55
Fair Value:  INR 2164.4
Est. Price by Mar 19:  INR 3266
Market Capitalization (INR Crs):  55914.54
Industry:  2/3 Wheelers
Rating:  BUY
Upside:  17%
Company Profile
Hero MotoCorp is a two-wheeler manufacturer. The Company manufactures and sells motorized two wheelers up to 350 cubic centimeters (cc) engine capacity, spare parts and related services.
Growth Per Share
Particulars 1-Year 3-Year 5-Year  
Revenue % 13% 60% 74%  
EBIT % 13% 57% 107%  
Earnings % 9% 55% 75%  
Book Value %  16% 80% 135%  
Stock Total Return %  16% 51% 146%  
Share holding pattern
Particulars %age   
(A) Promoter & Promoter Group 34.63  
(B) FII/FPI 39.95  
(C) DII/Insurance Companies 15.37  
(D) Public holding < 2 lakhs of cap. 6.00  
(E) Others 4.05  
Grand Total 100.00  
Fundamentals (Historical and Estimated)
Particulars Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18  Mar-19 E   Mar-20 E   Mar-21 E   Mar-22 E   Mar-23 E   
Price 1941 1714 2107 1517 2222 2476 2980 3231 3732 3266 3598 3909 4194 4446  
Return on Equity 64% 65% 55% 42% 38% 36% 36% 33% 31% 26% 25% 24% 23% 22%  
Price to Earning  17.4 17.8 17.7 14.3 21.0 20.7 18.8 19.1 20.2 18.4 18.4 18.4 18.4 18.4  
EVTI 2.2 1.5 1.6 1.1 1.6 1.6 1.9 2.0 2.0 1.6 1.5 1.5 1.5 1.5  
EVTIFM 17.4 17.8 17.7 14.3 21.0 20.7 18.8 19.1 20.2 18.4 18.4 18.4 18.4 18.4  
Price to Book Value 11.2 11.6 9.8 6.1 7.9 7.6 6.7 6.4 6.3 4.8 4.6 4.4 4.2 4.0  
Debt to Equity  0.0 0.2 0.2 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0  
Dividend Yield 6% 6% 2% 4% 3% 2% 2% 3% 3% 3% 3% 3% 3% 3%  
Cash Flow to Firm 10% 12% 1% 6% 8% 4% 6% 8% 7% 10% 10% 10% 10% 10%  
Detailed Estimates
Title Mar-18 Mar-19 E Mar-20 E Mar-21 E Mar-22 E Mar-23 E  
Sales     32,230.49     35,089.22     37,862.05     40,487.72     42,903.79     45,048.98  
EBITDA       5,806.01       5,975.59       6,447.79       6,894.94       7,306.38       7,671.70  
EBIT       5,250.41       5,370.71       5,916.49       6,428.25       6,896.47       7,311.65  
PBT       5,244.16       5,370.71       5,916.49       6,428.25       6,896.47       7,311.65  
NPAT       3,697.36       3,545.20       3,905.47       4,243.29       4,552.36       4,826.42  
Price to Earning             20.16            18.40            18.40            18.40            18.40            18.40  
Price to Book Value              6.33              4.82              4.64              4.44              4.22              3.99  
Debt to Equity                  -                   -                   -                   -                   -                   -    
Return on Equity              0.31              0.26              0.25              0.24              0.23              0.22  
Enterprise Value to Total Income (EVTI)              2.05              1.55              1.54              1.53              1.51              1.49  
Enterprise Value to Total Income to Firm Margin(EVTIFM)            21.10            18.38            17.92            17.49            17.06            16.64  
Price or Est. Share Prices       3,732.16       3,266.00       3,597.90       3,909.15       4,193.90       4,446.40  
DISCOUNTED CASH FLOW
Title Mar-19 E Mar-20 E Mar-21 E Mar-22 E Mar-23 E  
PBT       5,370.71       5,916.49       6,428.25       6,896.47       7,311.65  
Interest                 -                   -                   -                   -                   -    
Depreciation          604.88          531.31          466.68          409.92          360.06  
Cash Flow Before Tax       5,975.59       6,447.79       6,894.94       7,306.38       7,671.70  
Tax Rate            33.99            33.99            33.99            33.99            33.99  
Cash Flow After Tax       3,944.49       4,256.19       4,551.35       4,822.94       5,064.09  
Terminal Cash Flow                                                                                    -       55,366.07  
Total Cash Flow       3,944.49       4,256.19       4,551.35       4,822.94     60,430.16  
Present Value of Cash Flow     43,228.23  
Debt                 -    
Value of Equity     43,228.23  
Fair Value Per Share       2,164.40  
Equity          55,915
Debt                   0
Beta Take from Reuters 0.98
Risk Free Rate Prevailing Yield in India 7%
Market Risk Premium Assuming 8.82% premium for Equity Investments 7%
Interest Paid                   6
Tax Benefit                   2
Interest Net of Tax                   4
Debt                   0
Cost of Debt 0%
Cost of Equity 15%
Debt Weight 0%
Equity Weight 100%
WACC 15%
Cash Flow of Mar-23 E       5,064.09
Growth 5.0%
Present Value of Terminal Cashflow     55,366.07
Peer Comparision
# Name CMP Rs. Mar Cap Rs.Cr.  B.V. Rs. Annualized ROE % ROCE % Latest EVTI Latest EVTIFM CMP / BV P/E Debt / Eq Div Yld % Growth Rate R % SGR % Ann Total Income Unpledged Prom Hold % PQEIOI QoQ Sales % Qtr Sales Var % QoQ Profits % Qtr Profit Var % Graham's Number Rs.
   1  Maruti Suzuki        7,162.50        216,365       1,382.33            17.39            23.98              2.20            73.71              5.18            28.52                 -                1.12            11.95          242.37          82,342            56.21               378          -12.33              2.00          -33.53          -17.22       2,794.94
   2  Bajaj Auto        2,832.35          81,959          704.48            29.99            30.96              1.95            22.80              4.02            17.46              0.01              2.12            17.65        -151.45          31,996            49.30               130            -7.52            16.00            -2.85            20.49       1,603.43
   3  TVS Motor Co.           490.35          23,297            60.63            30.95            24.09              1.20            29.64              8.09            33.19              0.41              0.67            23.63            56.69          18,659            57.40               131            -6.60            26.10          -15.58            15.57          141.99
   4  Eicher Motors      21,137.50          57,652       2,867.26            37.61            49.40              5.04            34.15              7.37            27.20              0.02              0.52            31.85        -426.96          10,119            49.35               167            -2.79              3.18            -2.88              2.39       7,081.86
   5  Hero Motocorp        2,799.55          55,915          635.14            31.66            46.10              1.50            20.21              4.41            15.44                 -                3.39            15.42            93.93          32,210            34.63                 96          -13.49              7.53          -21.22            -4.51       1,609.89
   6  Atul Auto           291.45               640            99.98            37.90            33.61              0.75              9.69              2.92            12.06                 -                1.80            28.45            36.79               752            52.70                 45              5.47            44.28              7.98            66.08          233.18

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