Oct 23, 2013 ... Hero MotoCorp (HMCL) Q2FY14 results were marginally ahead of ...
management clarified that higher share of spare parts and favorable mix.
RESULT UPDATE
HERO MOTOCORP Robust quarter India Equity Research| Automobiles
Hero MotoCorp (HMCL) Q2FY14 results were marginally ahead of ours/consensus expectations and largely led by lower input costs. The management clarified that higher share of spare parts and favorable mix led to the surprise. We remain cautious over the demand in the near term while believe margin pressures would likely be addressed from cost saving measures undertaken by the company. We maintain our earnings estimates, TP (INR2,027) and `HOLD’ recommendation on the stock.
EDELWEISS 4D RATINGS Absolute Rating
HOLD
Rating Relative to Sector
Underperformer
Risk Rating Relative to Sector
High
Sector Relative to Market
Underweight
MARKET DATA (R: HROM.BO, B: HMCL IN) CMP
: INR 2,085
Lower input costs buoy margins
Target Price
: INR 2,027
HMCL reported PAT of INR4.8bn (up 9.3% YoY; down 12.2% QoQ), ~7%/4% ahead of ours/consensus estimate driven by better margins. EBITDA margins at 14.5%, versus estimated 14.1%, benefitted from lower input costs. RM to sales declined 80bps QoQ on higher share of spare part revenues and better product mix. Revenues at INR57.2bn (up 10.4% YoY, down 7% QoQ) were largely in line with our estimate. Average realizations at Rs 40,433 (up 4% YoY, 2.4% QoQ) also benefitted from favorable product mix/sale of spares).
52-week range (INR)
: 2,130 / 1,434
Share in issue (mn)
: 199.7
M cap (INR bn/USD mn)
: 416/ 6,741
Management confident on demand potential The management remains confident on festive season demand and expects at least flattish growth YoY for October/November. It believes the industry could revert to 10% growth CAGR over long term and key drivers like strong growth in scooters, 15 product refreshes, higher rural sales and entry into eight new export markets to keep volumes strong in the near term. Margin pressures driven by higher R&D, competitive intensity, adverse forex and rising input costs can be largely offset by cost saving (INR600-800mn in H2FY14E and INR15bn by FY17E) measures taken by the company.
Outlook and Valuations: Near term challenging, maintain ‘HOLD’
Avg. Daily Vol.BSE/NSE(‘000) : 385.1 SHARE HOLDING PATTERN (%) Current Q1FY14 52.2
52.2
MF's, FI's & BK’s
9.3
9.3
8.5
FII's
29.8
29.8
30.6
Others
8.7
8.7
8.8
Net revenue
Q2FY13 % Change Q1FY14 % Change
57,262
51,875
10.4
61,595
EBITDA
8,327
7,192
15.8
9,152
Adj, net profit
4,814
4,406
9.3
Dil. EPS (INR)
24.1
22.1
9.3
FY13
FY14E
(INR mn) FY15E
(7.0) 237,681
251,067
271,709
(9.0)
32,845
36,168
39,541
5,486
(12.2)
21,182
21,377
28,950
27.5
(12.2)
106.1
107.0
145.0
P/E (x)
19.7
19.5
14.4
EV/EBITDA (x)
11.5
10.4
9.4
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL , Thomson First Call, Reuters and Factset.
52.2
:
* Promoters pledged shares (% of share in issue)
NIL
PRICE PERFORMANCE (%) Stock
Nifty EW Auto Index
1 month
2.2
4.5
4.6
3 months
22.3
1.7
2.1
12 months
17.9
7.7
25.5
We continue to factor in an overall volume growth of 5% YoY for H2FY14 led by healthy festival season demand and new launches/refreshes by the company. We largely maintain our estimates and our target price of INR 2,027 (14x FY15E EPS) implies ~3% downside from current levels. Thus we maintain `Hold’ recommendation/rating on the stock.
Financials Year to March Q2FY14
Q4FY13
Promoters *
Aashiesh Agarwaal, CFA +91 22 4063 5491
[email protected]
Siddhartha Bera +91 22 6620 3099
[email protected]
October 23, 2013 Edelweiss Securities Limited
Automobiles Q2FY14 earnings conference call key highlights: Domestic demand •
Management targets a low single digit growth for overall volumes in FY14, broadly in line with industry. Believes industry can return to a 10% CAGR growth trend in the long term given the low penetration in rural areas.
•
Retail volumes for H1 are up 7% YoY versus flat wholesale dispatches for HMCL. Segment wise, motorcycles are up 5% while scooters are up 30%. Also, rural volumes are up 9% YoY while urban is up 5% YoY.
•
Management highlighted that October volumes are up in strong double digits on festival demand and low base (festival season was late by 15 days last year). Even including October and November retails, the management remains hopeful of exceeding last year volumes of 1.2mn units.
•
On region wise growth rates, expect north to lead followed by eastern and western regions.
•
Growth in rural regions should remain robust while urban demand to hold on.
•
Scooters are witnessing strong preference from males in urban areas too. Hence expect share to increase from ~21% currently to ~25% over 2-3 years.
•
HMCL’s share of rural demand stands at 48% versus ~45% couple of years back while at industry level, this should be ~40%.
•
Inventory levels are still high across industry, largely in anticipation of strong demand during Dhanteras/Diwali. For Hero, it is around 3 weeks (based on last month’s sales).
Exports •
Export volumes remained muted on poor demand from key markets in South Asia etc.
•
Company is currently present in 10 markets and expects to enter eight new markets in H2 (In Africa and Latin America).
•
Expect the benefits to be only visible from FY15.
•
However, the management maintains its long term target of 1mn exports or ~10% of total volumes by FY16/17.
Pricing •
Company had taken a price hike of ~INR 1,000 per bike, on 1st October. This should partially offset cost increases for steel, copper and rubber.
Margins
2
•
Wave one of cost rationalization project has completed with expected benefits of INR600–800mn to be visible in H2. This was mainly on one entry level motorcycle and scooter and pertains to adding/deleting certain features, logistics, RM consolidation etc.
•
Wave two of cost rationalization has begun from 1st October with focus on three models. These would also involve design changes etc. Post five phases of measures, expect substantial benefits of ~INR15bn of cost savings annually by FY17.
Edelweiss Securities Limited
Hero MotoCorp •
This should be partially offset by higher R&D costs which are expected to inch up to 0.75% of sales in FY14 from 0.47% currently and 1.25% in long term. Currently, these are sitting as advances made to R&D partners and would be expensed in P&L as and when the products are introduced from H2 onwards.
•
Company imports ~19,000 cast wheels per day. It has started manufacturing 3,000 units currently and expects to see substantial cost saving as the Chinese supplier sets up a plant in India.
•
Also, expect to see significant saving in freight costs as its Gujarat plant comes onstream.
Financing •
Vehicles purchased on finance have inched up from 22% last year to 25% currently. Hero Fincorp had financed 2,500 units in September and targets to finance ~10,000 vehicles in October.
Others •
HMCL is facing scooter supply constraints and expect this to be resolved by January as 15,000 units capacity gets added.
•
Capex guidance is maintained at INR11bn mainly for global part centre, Neemrana plant (with a peak capacity of 750,000 units).
•
Debtor days has increased owing to increase in distribution network (dealer count stands at 800) and higher stocking on festival season.
'
1,160
(10.0)
Volumes
% YoY
Q2FY14
Q1FY14
Q4FY13
Q3FY13
(15.0)
Q2FY13
1,000
75
75
74
76
75
17
22
19
19
20
21
Q2FY14
(5.0)
79
Q1FY14
1,320
60.0
Q4FY13
0.0
80.0
Q3FY13
1,480
4
Q2FY13
5.0
4
Q1FY13
1,640
Domestic Mix (%)
10.0
Chart 2: Domestic motorcycle mix trend 100.0 3 4 6 6
(% YoY)
1,800
Q1FY13
('000 Units)
Chart 1: Volume performance remains subdued
40.0 20.0 0.0
Economy
Executive
Premium Source: Edelweiss research
3
Edelweiss Securities Limited
Automobiles Chart 3: Favorable product mix drives ASPs
Chart 4: EBITDA margins normalizing 6.0
16
42 5.0
3.0
38 '
Margin (%)
4.0
39
15
(% YoY)
INR '000
40
14 12
2.0
36
11
4.6 '
Dep.+Royalty
0.48
3.0
0.40
Q1FY13
Q2FY14
Q1FY14
Q4FY13
Avg
% of sales
Q2FY14
Q1FY14
Q4FY13 Qtr end
Source: Edelweiss research
Chart 7: P/E 1 year forward band chart 2,500 18x
2,000
15x 12x
1,500
9x
1,000 500
Aug-13
Apr-13
Dec-12
Aug-12
Apr-12
Dec-11
Aug-11
Apr-11
Dec-10
Aug-10
Apr-10
Dec-09
Aug-09
Apr-09
Apr-08
0
Dec-08
Q3FY13
Q2FY13
2,500
3.8
Aug-08
2,620
0.56
Q2FY14
2,740
0.64
Q1FY14
5.4
Q4FY13
2,860
0.72
Q3FY13
6.2
Q2FY13
2,980
(Yen/ INR)
7.0
Chart 6: Yen/INR trend 0.80
(% of sales)
3,100
Q1FY13
(INR mn)
Chart 5: Royalty increases on adverse forex
Q3FY13
% YoY
Q2FY13
10
Q1FY13
Avg. realisation
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
1.0
Q1FY13
35
Source: Edelweiss Research
4
Edelweiss Securities Limited
Hero MotoCorp Chart 8: EV/EBITDA 1 year forward band chart 3,000 12x
2,400
9x
1,800
6x
1,200 3x
600
Aug-13
Apr-13
Dec-12
Aug-12
Apr-12
Dec-11
Aug-11
Apr-11
Dec-10
Aug-10
Apr-10
Dec-09
Aug-09
Apr-09
Dec-08
Aug-08
Apr-08
0
Source: Edelweiss research
Table 1: Key assumptions Units Motorcycle Domestic Exports Scooter Domestic Exports Total YoY(%) Motorcycle Domestic Exports Scooter Domestic Exports Total
FY12 5,781,310 5,648,605 132,705 455,584 417,597 37,987 6,236,894
FY13 5,501,744 5,365,229 136,515 574,865 549,808 25,057 6,076,609
FY14E 5,503,383 5,366,868 136,515 729,785 714,750 15,034 6,233,167
FY15E 5,691,425 5,477,096 214,329 909,211 879,143 30,068 6,600,636
FY12 14.7 14.7 15.8 26.0 21.8 105.5 15.4
FY13 (4.8) (5.0) 2.9 26.2 31.7 (34.0) (2.6)
FY14E 0.0 0.0 0.0 26.9 30.0 (40.0) 2.6
FY15E 3.4 2.1 57.0 24.6 23.0 100.0 5.9
FY12 92.7 90.6 2.1 7.3 6.7 0.6 100.0
FY13 90.5 88.3 2.2 9.5 9.0 0.4 100.0
FY14E 88.3 86.1 2.2 11.7 11.5 0.2 100.0
FY15E 86.2 83.0 3.2 13.8 13.3 0.5 100.0
Table 2: Product mix Motorcycle Domestic Exports Scooter Domestic Exports Total
Source: Edelweiss research
5
Edelweiss Securities Limited
Automobiles Table 3: Valuations FY15E 145 14 2,027
Recurring EPS Earning multiple Target Price
Source: Edelweiss research
Table 4: Edelweiss vs consensus (standalone) (INR mn) FY14E FY15E Particulars Edelweiss Consenses % var Edelweiss Consenses % var Sales (INR mn) 251,067 252,068 (0.4) 271,709 281,594 (3.5) EBITDA (INR mn) 36,168 35,102 3.0 39,489 40,014 (1.3) EBITDA (%) 14.4 13.9 14.5 14.2 EPS (INR) 107.0 108.0 (0.9) 144.8 141.4 2.4 Source: Edelweiss research
6
Edelweiss Securities Limited
Hero MotoCorp Financial snapshot Year to March Net revenues Total operating income Raw material costs Staff costs Other expenses Total expenditure EBITDA Depreciation Depreciation & amortization Other income Interest Profit before tax Tax Net profit Adjusted net profit As % of net revenues Raw material Employee cost Other expenses EBITDA Adjusted net profit Tax rate
Q2FY14 57,262 57,262 40,955 2,290 5,690 48,935 8,327 749 2,869 1,155 30 6,583 1,769 4,814 4,814
Q2FY13 51,875 51,875 37,702 1,922 5,059 44,683 7,192 853 2,895 993 30 5,261 855 4,406 4,406
71.5 4.0 9.9 14.5 8.4 26.9
72.7 3.7 9.8 13.9 8.5 16.3
7
% change 10.4 10.4 8.6 19.2 12.5 9.5 15.8 (12.2) (0.9) 16.2 0.3 25.1 106.9 9.3 9.3
Q1FY14 61,595 61,595 44,556 2,215 5,672 52,443 9,152 724 2,744 1,123 30 7,502 2,016 5,486 5,486
72.3 3.6 9.2 14.9 8.9 26.9
% change (7.0) (7.0) (8.1) 3.4 0.3 (6.7) (9.0) 3.5 4.6 2.9 0.3 (12.2) (12.2) (12.2) (12.2)
YTD FY14 118,857 118,857 85,511 4,505 11,362 101,378 17,479 1,473 5,613 2,277 59 14,084 3,785 10,300 10,300
FY14E 251,067 251,067 181,270 9,112 24,516 214,898 36,168 11,266 4,099 113 28,888 7,511 21,377 21,377
(INR mn) FY15E 271,709 271,709 195,902 9,568 26,698 232,168 39,541 5,881 4,489 107 38,042 9,092 28,950 28,950
143.9 7.6 19.1 29.4 17.3 53.7
72.2 3.6 9.8 14.4 8.5 26.0
72.1 3.5 9.8 14.6 10.7 23.9
Edelweiss Securities Limited
Automobiles Company Description HMC is the world’s largest two-wheeler company (in volume terms). It has a production capacity of 6.5 mn two wheelers at its two manufacturing facilities at Gurgaon and Dharuhera in Haryana and one at Uttaranchal. The company offers motorcycles in all the three major segments—CD Dawn and CD Deluxe in entry; Splendour, Passion, and Glamour in executive; and Hunk, Achiever, CBZ and Karizma in premium. It also sells Pleasure in the ungeared scooter segment.
Investment Theme Volume growth is likely to be muted on weak market sentiment and inventory related issues. Margins should also see pressure due to increasing input costs and SGA expenses on higher competitive intensity and entry into newer export markets. Partial withdrawal of tax benefits at Haridwar plant should also lower net margin in FY14.
Key Risks Increasing competitive intensity from peers like Honda and Bajaj Auto may result in Hero losing market share further which would result in lower sales volume and margins as well. Weak INR is a key negative for increasing royalty charges.
8
Edelweiss Securities Limited
Hero MotoCorp
Financial Statements Key Assumptions Year to March
Income statement FY12
FY13E
FY14E
FY15E
Macro GDP(Y-o-Y %) Inflation (Avg)
6.2 8.9
5.0 7.4
4.8 5.2
6.0 6.0
Repo rate (exit rate)
8.5
7.5
6.8
6.0
48.0
54.5
62.0
60.0
Year to March Total volume (nos) % Growth in volume
(INR mn) FY12
FY13
FY14E
FY15E
6,236,894 6,076,609 6,233,167 6,600,636 15.4 (2.6) 2.6 5.9
Income from operations
235,790
237,681
251,067
271,709
Materials costs
173,942
175,268
181,270
195,902
Manufacturing expenses
1,023
1,059
1,165
1,281
Employee costs
7,355
8,209
9,112
9,568
Total SG&A expenses
17,282
20,300
23,351
25,469
EBITDA
36,188
32,845
36,168
39,489
Depreciation & Amortization
10,973
11,418
11,266
5,881
Company
EBIT
25,214
21,427
24,902
33,609
Revenue assumptions
Non-Operational Income
3,646
3,984
4,099
4,489
USD/INR (Avg) Sector Motorcycle - dom. vol. (% YoY) Steel prices (INR/t) Aluminium prices (USD/t)
11.9
0.1
1.5
2.8
38,500
39,200
39,200
39,200
2,316
2,300
2,400
2,400
Volume growth (% YoY)
Interest expenses
Motorcycle - Domestic
14.7
(5.0)
-
2.1
Profit before tax
Motorcycle - Exports
27.2
39.6
37.5
28.8
Provision for tax
26
26
27
25
37,478
38,809
39,922
5.2
3.6
2.9
Scooter - total vol Avg realisation (INR) Avg realisation (% YoY)
213
119
113
107
28,647
25,292
28,888
37,990
5,681
4,110
7,511
9,080
Net profit
22,966
21,182
21,377
28,910
40,760
Profit After Tax
22,966
21,182
21,377
28,910
2.1
Basic EPS (INR)
115.0
106.1
107.0
144.8
200
200
200
200
115.0
106.1
107.0
144.8
Top 5 models (by sales)
Shares outstanding (mn)
Splendor
2,753,327 2,337,009 2,196,788 2,196,788
Diluted EPS (INR)
Passion
1,438,405 1,372,953 1,414,142 1,456,566
Dividend per share (INR)
45.0
60.0
50.0
60.0
Dividend payout (%)
39.1
56.6
46.7
41.4
Year to March
FY12
FY13
FY14E
FY15E
Operating expenses Materials costs
84.7 73.8
86.2 73.7
85.6 72.2
85.5 72.1
S G & A expenses
7.3
8.5
9.3
9.4
Depreciation
4.7
4.8
4.5
2.2
15.3
13.8
14.4
14.5
9.7
8.9
8.5
10.6
CD Delux
782,476
977,180 1,050,469 1,071,478
Glamour
292,567
358,089
436,869
471,818
CBZ
210,154
112,741
90,193
94,702
28,053
29,017
29,268
29,873
1,179
1,351
1,462
1,450
Cost assumptions RM cost/vehicle Employee cost/vehicle Average salary Promotion cost (% revenue)
1,204,586 1,403,762 1,518,702 1,568,496
Common size metrics
2.0
2.1
2.1
2.1
5,802
5,405
5,803
5,983
6.0
5.9
6.3
6.3
Tax rate (%)
19.8
16.3
26.0
23.9
Growth ratios (%)
Dividend payout ratio (%)
45.5
66.2
54.6
48.5
Year to March
FY12
FY13
FY14E
FY15E
Revenues EBITDA
21.8 40.0
0.8 (9.2)
5.6 10.1
8.2 9.2
EBITDA/vehicle Financial assumptions Average Depreciation rate (%)
EBITDA margins Net profit margins
Balance sheet assumptions Net borrowings (INR mn)
(327)
-
-
-
Capex (INR mn)
5,651
6,076
14,000
14,000
PBT
14.9
(11.7)
14.2
31.5
4
10
11
11
EPS
13.9
(7.8)
0.9
35.2
14
13
15
15
Debtor days Inventory days Payable days Cash conversion cycle (days)
48
39
50
46
(30)
(15)
(24)
(20)
9
Edelweiss Securities Limited
Automobiles Balance sheet As on 31st March
(INR mn)
Cash flow metrics
FY12
FY13
FY14E
FY15E
FY12
FY13
FY14E
FY15E
Equity capital Reserves & surplus
399 42,499
399 49,663
399 59,358
399 74,249
Operating cash flow Investing cash flow
14,483 10,043
9,603 1,973
20,830 (7,812)
31,762 (20,328)
Shareholders funds
42,898
50,062
59,757
74,649
Financing cash flow
(24,582)
(10,563)
(11,796)
(14,126)
Deferred tax liability
12,031
4,136
1,124
924
(56)
1,013
1,222
(2,692)
Sources of funds
54,929
54,198
60,881
75,573
Capex
(5,651)
(6,076)
(14,000)
(14,000)
Tangible assets Intangible assets
17,431 20,424
18,918 11,792
23,651 2,793
41,502 -
Dividends paid
(14,018)
(11,682)
(14,019)
(15,187)
388
621
7,621
621
Total net fixed assets
38,244
31,331
34,064
42,123
Year to March
FY12
FY13
FY14E
FY15E
Current Investments
39,643
36,238
36,238
45,298
Cash and equivalents
768
1,810
3,032
340
ROAE (%) ROACE (%)
63.4 56.7
45.6 46.6
38.9 50.4
43.0 55.8
Inventories
6,756
6,368
7,497
8,103
Inventory day
13
14
14
15
Sundry debtors
2,723
6,650
7,566
8,188
Debtors days
3
7
10
11
Loans and advances
10,092
13,336
13,336
14,003
Payable days
39
43
44
46
Other current assets
664
683
752
827
(23)
(23)
(20)
(21)
Total current assets (ex cash)
20,235
27,037
29,152
31,122
Current ratio
0.5
0.7
0.8
0.7
Trade payable
22,932
18,733
24,991
24,851
Fixed asset turnover (x)
5.9
6.8
7.7
7.1
Others current liabilities
21,028
23,485
16,614
18,460
CWIP (incl. intangible)
Total current liabilities & Net current assets (ex cash) Uses of funds Book value per share (INR)
43,960
42,218
41,605
43,310
(23,725)
(15,181)
(12,454)
(12,188)
54,929
54,198
60,881
75,573
214.8
250.7
299.2
373.8
Free cash flow Year to March Net profit Depreciation Others Gross cash flow
Year to March
Net cash flow
Profitability & efficiency ratios
Cash conversion cycle (days)
Operating ratios Year to March
FY12
FY13
FY14E
FY15E
Total asset turnover Fixed asset turnover
4.6 5.9
4.4 6.8
4.4 7.7
4.0 7.1
Equity turnover
6.5
5.1
4.6
4.0
(INR mn) FY12
FY13
FY14E
FY15E
22,966 2,115
21,182 2,267
21,377 3,791
28,910 4,094
(18,471)
(16,573)
(4,604)
Valuation parameters Year to March
FY12
FY13
FY14E
FY15E
(1,911)
Diluted EPS (INR) Y-o-Y growth (%)
115.0 13.9
106.1 (7.8)
107.0 0.9
144.8 35.2
CEPS (INR)
170.0
163.2
163.5
174.2
18.1
19.7
19.5
14.4
6,611
6,875
20,564
31,093
Less: Changes in WC
(7,872)
(2,727)
(265)
(669)
Operating cash flow
14,483
9,603
20,830
31,762
Price/BV (x)
9.7
8.3
7.0
5.6
Less: Capex
5,651
6,076
14,000
14,000
EV/Sales (x)
1.6
1.6
1.5
1.4
Free cash flow
8,832
3,526
6,830
17,762
EV/EBITDA (x)
10.4
11.5
10.4
9.4
2.2
2.9
2.4
2.9
Price/BV (X) FY14E
FY15E
Diluted PE (x)
Dividend yield (%) Peer comparison valuation Market cap (USD mn)
Name Hero MotoCorp Bajaj Auto Maruti Suzuki India Ltd
Diluted PE (X) FY14E FY15E
6,741 10,113
19.5 16.6
14.4 14.3
EV/EBITDA (X) FY14E FY15E 10.4 11.5
9.4 9.6
7.0 6.0
5.6 4.8
7,473
17.8
14.0
8.1
6.6
2.2
1.9
Median
-
17.8
14.3
10.4
9.4
6.0
4.8
AVERAGE
-
18.0
14.3
10.0
8.5
5.1
4.1
Source: Edelweiss research
10
Edelweiss Securities Limited
Hero MotoCorp
Additional Data Directors Data Pradeep Dinodia V P Malik Dr. Anand C Burman Analjit Singh Paul Edgerley Toshiyuki Inuma Pawan Munjal
Non-Executive Independent Directors Non-Executive Independent Directors Non-Executive Independent Directors Non-Executive Independent Directors Other Non-Executive Directors Other Non-Executive Directors Executive Directors
Dr. Pritam Singh M Damodaran Ravi Nath Suman Kant Munjal Takashi Nagai Brijmohan Lall Munjal Sunil Kant Munjal
Non-Executive Independent Directors Non-Executive Independent Directors Non-Executive Independent Directors Other Non-Executive Directors Other Non-Executive Directors Executive Directors Executive Directors
Auditors - A F Ferguson & Co *as per last annual report
Holding – Top10 Perc. Holding 9.72 2.70 0.63 0.54 0.44
Aberdeen Asset Management Capital International Investors Blackstone asia advi Uti asset management Danske invest a/s
Perc. Holding 5.35 1.17 0.60 0.50 0.33
Life insurance corp Vanguard group inc Blackstone Fund Adv Baillie gifford and co. Edinburg fund managers
*in last one year
Bulk Deals Data
Acquired / Seller
B/S
Qty Traded
Price
No Data Available
*in last one year
Insider Trades Reporting Data
Acquired / Seller
B/S
Qty Traded
*in last one year
11
Edelweiss Securities Limited
RATING & INTERPRETATION
Company Amara Raja Batteries Bajaj Auto
Absolute
Relative
Relative
reco
reco
risk
BUY
None
None
HOLD
SP
L
Company
Absolute
Relative
Relative
reco
reco
Risk
Ashok Leyland
HOLD
SP
H
Eicher Motors
HOLD
SU
M
HOLD
SU
H
BUY
SO
H
Exide Industries
BUY
SP
L
Hero MotoCorp
Mahindra & Mahindra Ltd
BUY
SO
M
Maruti Suzuki India Ltd
Tata Motors Ltd
BUY
SP
H
ABSOLUTE RATING Ratings
Expected absolute returns over 12 months
Buy
More than 15%
Hold
Between 15% and - 5%
Reduce
Less than -5%
RELATIVE RETURNS RATING Ratings
Criteria
Sector Outperformer (SO)
Stock return > 1.25 x Sector return
Sector Performer (SP)
Stock return > 0.75 x Sector return Stock return < 1.25 x Sector return
Sector Underperformer (SU)
Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe within the sector
RELATIVE RISK RATING Ratings
Criteria
Low (L)
Bottom 1/3rd percentile in the sector
Medium (M)
Middle 1/3rd percentile in the sector
High (H)
Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING Ratings
Criteria
Overweight (OW)
Sector return > 1.25 x Nifty return
Equalweight (EW)
Sector return > 0.75 x Nifty return Sector return < 1.25 x Nifty return
Underweight (UW)
Sector return < 0.75 x Nifty return
12
Edelweiss Securities Limited
Hero MotoCorp Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098. Board: (91-22) 4009 4400, Email:
[email protected] Vikas Khemani
Head Institutional Equities
[email protected]
+91 22 2286 4206
Nischal Maheshwari
Co-Head Institutional Equities & Head Research
[email protected]
+91 22 4063 5476
Nirav Sheth
Head Sales
[email protected]
+91 22 4040 7499
Coverage group(s) of stocks by primary analyst(s): Automobiles Ashok Leyland, Bajaj Auto, Eicher Motors, Exide Industries, Hero MotoCorp, Mahindra & Mahindra Ltd, Maruti Suzuki India Ltd, Tata Motors Ltd
Recent Research Date
Company
21-Oct-13
17-Oct-13 01-Oct-13
Title
Price (INR)
Mahindra & Wage agreement has minimal Mahindra financial impact; EdelFlash Bajaj Auto
Surpasses expectation; Result Update
Recos
888
Buy
2153
Hold
Automobiles September: Weak start to the festive season; Sector Update
Distribution of Ratings / Market Cap Rating Interpretation
Edelweiss Research Coverage Universe
Rating Distribution* * 1 stocks under review > 50bn Market Cap (INR)
112
Buy
Hold
127
44
Reduce
Total
8
180
Between 10bn and 50 bn
< 10bn
54
Rating
Expected to
Buy
appreciate more than 15% over a 12-month period
Hold
appreciate up to 15% over a 12-month period
Reduce
depreciate more than 5% over a 12-month period
14
13
Edelweiss Securities Limited
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Edelweiss Securities Limited
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