Escolar Documentos
Profissional Documentos
Cultura Documentos
Detailed Report
CRISIL
Fundamental Grade
Assessment
CRISIL
Valuation Grade
Assessment
5/5
Excellent fundamentals
5/5
4/5
Superior fundamentals
4/5
3/5
Good fundamentals
3/5
2/5
Moderate fundamentals
2/5
1/5
Poor fundamentals
1/5
CRISIL Privacy
CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service
your account and to provide you with additional information from CRISIL and other parts of McGraw Hill Financial you may find of interest.
For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy.
You can view McGraw Hill Financials Customer Privacy Policy at http://www.mhfi.com/privacy.
Last updated: August, 2014
Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias
the grading recommendation of the company.
Disclaimer:
This Company commissioned CRISIL IER report is based on data publicly available or from sources considered reliable. CRISIL Ltd.
(CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to
change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report
constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use
made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This
report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or
communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any
purpose. As per CRISILs records, none of the analysts involved has any ownership / directorship in the company. However CRISIL or its
associates may have commercial transactions with the company.
RESEARCH
Valuation Grade
Industry
Automobiles
Fair Value
CMP
Excellent
Fundamentals
5
4
3
2
1
Poor
Fundamentals
FY15
2,75,327
34,895
25,209
126.2
21.5
2.0
48.0
41.4
23.4
9.0
16.1
FY16E
2,78,298
43,211
30,639
153.4
21.5
2.9
54.3
43.2
19.2
7.7
13.0
FY17E
3,16,472
50,032
35,617
178.4
16.2
3.4
54.6
43.2
16.5
6.6
11.2
FY18E
3,58,054
56,077
39,637
198.5
11.3
4.6
54.5
42.7
14.9
6.1
9.9
Valuation Grade
Strong
Upside
7850/25607
NSE/BSE ticker
HEROMOTOCO
199.7
5,78,575/8,698
5,52,858/8,311
3,172/2,251
Beta
1.0
65.4%
5,07,999
1,493
SHAREHOLDING PATTERN
100%
8.9%
90%
13.7%
13.5%
13.4%
80%
10.9%
13.4%
13.8%
40.8%
38.5%
38.2%
41.9%
34.6%
34.6%
34.6%
34.6%
Mar-15
Jun-15
Sep-15
14.6%
70%
60%
50%
40%
30%
20%
10%
0%
Promoter
FY14
2,53,135
35,533
20,743
103.9
(2.1)
2.2
45.9
39.0
28.4
10.5
15.6
Strong
Downside
CFV MATRIX
Fundamental Grade
After a subdued 9MFY16, volumes of Hero MotoCorp Ltd (Hero) - Indias largest two-wheeler
(2W) manufacturer bounced back in the past three months. A confluence of growth
impediments subdued rural demand and competition across segments led to 3% y-o-y
decline in volumes in 9MFY16. However, successful launch of new scooters coupled with
moderate uptick in demand led to 9% volume growth in Q4FY16. Going forward, expected
revival in rural consumption, assuming normal monsoons, is likely to augment domestic 2W
demand, particularly in the economy and executive segments. With sustained market
leadership in these segments (~80% of domestic motorcycles), Hero is well poised to
capitalise on industry revival. Further, low penetration of two-wheelers in rural areas spells
long-term growth potential. Strong market positioning, healthy brand recall and wide rural
reach are expected to enable Hero to benefit from this potential. Launch of new scooter
models is likely to improve its positioning in the fast-growing segment. Nevertheless, weak
positioning in the premium segment and competition across product categories are foremost
challenges. We maintain the fundamental grade of 5/5.
3,251
2,897
FII
Dec-15
DII
Others
3-m
6-m
12-m
Hero MotoCorp
1%
13%
10%
22%
CNX 500
4%
4%
-3%
-3%
ANALYTICAL CONTACT
Bhaskar Bukrediwala
bhaskar.bukrediwala@crisil.com
Hemali Dhame
hemali.dhame@crisil.com
sayan.sharma@crisil.com
clientservicing@crisil.com
Motorcycles
Scooters
86.5%
13.5%
84.5%
15.5%
Key brands
Deluxe
Passion , Glamour
CBZ, Hunk, Ignitor, Karizma
Geographic presence
Market position
FY16
share in FY16
in FY16
in FY16
Industry growth expectations
5% y-o-y in FY17
Sales growth
4.9%
13.4%
Convenience in utility
New launches
Lower penetration
Key competitors
Key monitorables / risks
Note: Classification by the industry body SIAM based on engine capacity in five categories.
CRISIL Research classifies in three categories based on engine capacity, positioning and pricing.
Source: Company, CRISIL Research
Grading Rationale
Hero beats industry headwinds to maintain market leadership,
well poised to leverage on industry prospects
After growing 8% y-o-y in FY15, domestic 2W volume growth moderated to 3% y-o-y in FY16.
Prolonged slowdown in rural spending led to muted domestic motorcycle volume in FY16.
Growth in scooters also moderated from FY15 levels (25% y-o-y), but remained in double
digits (12% y-o-y). Although Heros domestic 2W volume remained flat in FY16, it posted
strong volume growth in Q4FY16 (9% y-o-y versus a decline of 3% y-o-y in 9MFY16) and
muted 9MFY16
maintained its market leadership in the domestic 2W industry. The company continues to
sustain its leadership in the economy segment with a dominant 48% share. It continues to
lead the executive segment (largest within domestic 2W industry) as well, with over 72%
share, supported by strong positioning of brands such as Splendor, Passion and Glamour.
While intense competition and weaker product positioning are posing challenges in the
premium segment of domestic motorcycles and scooters, the company is trying to combat
them by launching products (especially in scooters segment). The industry is expected to
recover in H2FY17, powered by higher consumption, both in rural areas (assuming normal
monsoon) and urban areas (where some resilience is already visible). The company is well
poised to benefit from the industry upturn owing to strong positioning in the key economy and
executive segments. Entry into newer geographies is likely to amplify growth in exports.
scooters
(%)
(%)
60%
48%
48%
32%
32%
46%
44%
7% 7%
14%
5%
FY12
FY11
Hero
8%
6%
7%
25%
14%
26%
12%
8%
8%
5%
6%
7%
9%
FY13
FY14
FY15
FY16
Honda
50%
47%
55%
55%
43%
40%
11%
5%
44%
31%
27%
8%
45%
53%
49%
Bajaj
TVS
30%
21%
20% 18%
10%
17%
20%
17%
16%
19%
19%
16%
15%
10%
0%
0%
2%
FY11
FY12
FY13
0%
Others
Hero
Honda
13%
18%
17%
15%
8%
5%
5%
FY14
FY15
Yamaha
TVS
15%
7%
6%
FY16
Others
Impact
2014-15
2015-16E
2016-17P
Overall demand
NF
Demand-side variables
NF
NF
NF
Farm incomes
NF
NF
Rural wages
NF
NF
Cost of ownership
Fuel prices
Interest rates
NF
Rural demand
Urban demand
Consumer confidence
Supply-side variables
New model launches
Capacity
expansion/constraints
Rural
Urban
~50%
~95%
~42%
~67%
(FY16-20E)
Motorcycles
6%-8%
Reasons
Growing rural consumption will improve demand for the economy and
executive segments
14%-16%
Total 2W
8%-10%
competitive pressure, the company has gained share in FY16 increased to 72% in FY16
from 66% a year ago. We expect Hero to significantly draw on the growth prospects, given its
strong brands in this segment.
3.4
16.8
7.4
70%
3.0
2.0
12.0
21.2
2.6
20.2
4.8
14.4
10.3
9.2
2.9
8.4
22.4
14.6
2.3
4.0
25%
21.6
20%
19.7
10%
50%
5%
72.4
30%
75.7
66.5
62.6
61.0
66.3
15%
60%
40%
22.3%
72.1
9.6%
5.1%
12.4%
0%
5.6%
2.4%
1.9%
-5%
20%
-1.6%
-2.7%
-10%
10%
-9.4%
-15%
0%
FY 10
Hero
FY 11
FY 12
Honda
FY 13
FY 14
Bajaj
FY 15
Others
FY16
FY11
FY12
FY13
-9.5%
FY14
FY15
FY16
Hero
Market
share
Bajaj
Hero
Market
Price
FY15
share
Product
Segment
(000)
FY16 %
CT 100
Economy
~37
NA
24.4
Platina
Economy
~45
23.5
11.4
HF Series
Economy
~38
53.9
48.3
Splendor
Executive
~50
38.5
42.3
Passion
Executive
~47
20.8
19.4
Economy
19.5
22.8
Executive
61.8
56.1
50.0
53.2
43.5
46.4
30.2
30.0
20.0
26.3
28.8
28.7
24.7
26.6
24.9
21.9
24.2
19.4
24.9
35.6
21.8
16.3
FY 10
FY 11
Even as the premium segment grew 13% y-o-y in FY16, weak product positioning and
competitive pressure dragged down Heros growth by 17.6%. In contrast, the industry reported
robust growth, driven by rising urban incomes and consumption. The premium segment also
garnered higher share in domestic motorcycles 21% in FY16, up ~250bps y-o-y owing to
better quality of products and technology, deployed by both, existing and new players.
However, Hero was unable to improve its product positioning after it split with Honda due to
lack of technological advantage and brand positioning in this segment. As a result, its market
48.1
44.7
10.0
53.3
40.0
Hero
56.4
FY 12
FY 13
Bajaj
FY 14
FY 15
Others
FY16
46.0
48.2
42.1
45.0
40.6
37.1
40.0
35.0
35.2
35.0
market
30.0
25.0
19.6
20.4
22.2
19.4
15.0
in
the
premium
16.2
16.0
20.0
share
11.5
10.0
5.0
4.1
3.2
FY 10
Hero
FY 11
Honda
4.6
FY 12
Bajaj
7.3
FY 13
11.0
FY 14
Royal Enfield
7.9
FY 15
TVS
5.8
FY16
Others
In FY15, Hero commenced operations at its R&D Centre at Kukus, Rajasthan with
600 engineers.
Hero has appointed Dr. Markus Braunsperger from BMW, Germany as its chief
technology officer.
Despite several steps initiated towards technological development, Heros ability to either
build in-house technology or enter into further technological tie-ups and improve its
product acceptability would determine its success. This remains a key monitorable.
Q4FY16. It also launched a new variant Maestro Edge. Going ahead, it is expected to
launch new models such as Dare (125cc), ZIR (150cc) and Leap Hybrid (124cc petrol unit)
during FY17 and FY18. Further, there are plans of launching other premium scooters as well.
Product launches are likely to help Hero revive its aging product portfolio. It gained market
share (20% in Q4FY16 from 12% in Q2FY16; FY16 market share of 17%) after the launch of
new products during the festive season. While the positive consumer response is
encouraging, sustenance of this momentum in the coming quarters is a monitorable. We
expect the scooter segment to record 20% CAGR over FY16-18E.
23%
1,000
20%
57%
60%
51%
12%
600
9%
32%
15%
10%
8%
20%
10%
752
819
901
12%
1,009
0%
0
FY14
FY15
Scooter
FY16
FY17E
FY18E
26%
27%
26%
21%
20%
19%
31%
27%
Hero
Despite Indias 2W exports increasing 18% y-o-y in FY15, Heros share remained ~9%.
Growth was muted in FY16 due to industry slowdown. Yet, over the long term, Hero has a
focused strategy on exports. While it currently caters to demand from ~22 countries, it plans to
strengthen its positioning in the existing markets and enter new markets.
We expect such expansions to help Hero optimise costs and drive product differentiation for
local customers.
Going ahead, demand from key target markets - Africa, Latin America and South-East Asia is a monitorable. While we forecast ~12-14% CAGR for Indian 2W exports over FY16E-20E,
Heros exports are estimated to grow marginally faster at ~15%.
23%
17%
13%
Aug-15 Sep-15
53%
0%
Growth (RHS)
29%
20%
5%
687
54%
54%
50%
10%
200
30%
30%
400
52%
50%
40%
800
57%
Honda
Other
trends
improve share
50.0%
(%)
53.0%
60.0%
80.0
44.5%
36.2%
70.0
40.0%
30.0%
65.7
65.9
67.7
66.1
63.5
61.9
30.2
30.0
58.9
60.0
34.3%
50.0
29.0%
20.0%
6.5%
10.0%
-0.9%
17.9%
5.1%
40.0
30.0
0.0%
1.0%
-10.0%
-20.0%
FY11
-18.8%
FY13
FY14
FY12
Industry growth
26.3
24.2
25.7
8.3
7.8
8.1
8.2
6.3
8.1
8.1
FY 11
FY 12
FY 13
FY 14
FY 15
FY16
10.0
-16.3%
-30.0%
20.0
33.0
25.9
FY15
Hero growth
FY16
FY 10
Hero
Bajaj
others
10
Financial Outlook
Revenue to record 13% CAGR over FY16E-18E
Revenue is expected to grow at a CAGR of 13.4% over FY16-18E driven by volume growth of
11.5%. The motorcycle segment is expected to log a CAGR of 15%. Scooter sales are
expected to post ~11% CAGR, fuelled by product launches and better acceptability. Exports
are expected to grow ~17% in compounded terms.
FY18E
( bn)
(mn units)
350
13.7%
13.1%
300
250
200
8.8%
5.6%
150
100
1.1%
50
253
275
278
316
358
FY14
FY15
FY16E
Operating Income
FY17E
16%
9.00
14%
8.00
12.0%
12%
7.00
10.0%
10%
6.00
8%
5.00
6%
4.00
4%
3.00
2%
2.00
0%
1.00
-2%
0.00
FY18E
11.8%
14.0%
11.3%
8.0%
6.2%
6.0%
2.8%
4.0%
2.0%
0.0%
0.0%
-2.0%
6.25
6.63
6.63
7.41
8.25
FY14
FY15
FY16E
FY17E
FY18E
-4.0%
-6.0%
Growth (RHS)
Volumes
Growth (RHS)
()
43,000
2.5%
2.5%
2.3%
3.0%
42,500
2.5%
42,000
2.0%
41,500
0.8%
1.5%
0.6%
1.0%
41,000
40,500
100%
2%
3%
3%
4%
4%
90%
11%
3%
11%
2%
12%
2%
13%
2%
14%
67%
66%
65%
64%
63%
17%
17%
17%
17%
18%
FY17E
FY18E
80%
60%
0.5%
50%
0.0%
40%
-0.5%
30%
39,500
-1.0%
20%
39,000
-1.5%
10%
40,000
40,092
40,396
40,638
41,654
42,607
-2.0%
38,500
FY14
FY15
Realisation
FY16E
FY17E
FY18E
Growth (RHS)
2%
70%
0%
FY14
Economy
FY15
FY16E
Executive
Premium
Scooters
Export
11
( mn)
60,000
50,000
15.8%
15.5%
15.7%
18.0%
16.0%
14.0%
12.7%
14.0%
40,000
12.0%
10.0%
30,000
8.0%
20,000
6.0%
4.0%
10,000
35,533
34,895
43,211
50,032
56,077
FY14
FY15
FY16E
FY17E
FY18E
2.0%
0.0%
EBITDA
12,000
15.1%
15.8%
15.6%
16.0%
13.5%
10,000
12.0%
18.0%
12.3%
14.0%
8,000
12.0%
10.0%
6,000
8.0%
4,000
6.0%
4.0%
2,000
9,348
8,218
8,384
10,479
10,834
11,399
2.0%
0.0%
45,000
40,000
35,000
11.3%
11.1%
9.2%
10.0%
8.2%
30,000
8.0%
25,000
6.0%
20,000
15,000
4.0%
10,000
5,000
2.0%
20,743
25,209
30,639
35,617
39,637
FY14
FY15
FY16E
FY17E
FY18E
0.0%
Adj PAT
12
12.0%
Management Overview
CRISIL's fundamental grading methodology includes a broad assessment of management
quality, apart from other key factors such as industry and business prospects, and financial
performance.
Pawan Munjal, Chairman, Managing Director and CEO, is responsible for growth and
strategic planning for the entire group. He has managed to achieve technological
excellence in the company's operations. He is also on the board of Indian Institute of
Management, Lucknow and Indian School of Business.
Sunil Kant Munjal was appointed Joint Managing Director effective August 2011. He is
also on the Board of Indian School of Business, Hyderabad and visiting faculty at various
13
The company has generated positive operating cash flows in the past eight years
despite incurring capex.
Debtor and inventory days rose slightly, while creditor days fell due to business
requirements.
The company has consistently paid dividends over the past few years dividend payout
has been higher than 50% in the past five years.
In our opinion, disclosure levels are satisfactory based on publicly available information
such as quarterly analyst presentations, annual reports, content on website, quarterly
conference calls and other public documents.
14
Valuation
Grade: 4/5
We have revised our earnings forecasts for FY16-18 and raised our fair value to 3,251 per
share from 2,910 per share. The fair value implies P/E multiples of 18.2x and 16.4x in FY17E
per share
and FY18E, respectively. At the current market price of 2,897, our valuation grade is 4/5.
WACC computation
FY17E-26E
Terminal value
Cost of equity
12.1%
12.1%
7.3%
6.7%
WACC
Terminal growth rate
12.8%
12.8%
3.0%
Sensitivity analysis to terminal year EBITDA margin and terminal growth rate
margin
2%
3%
4%
5%
14.3%
2,820
2,933
3,069
3,236
3,447
15.3%
2,895
3,015
3,160
3,338
3,561
16.3%
2,971
3,098
3,251
3,439
3,676
17.3%
3,046
3,181
3,342
3,541
3,790
18.3%
3,122
3,263
3,433
3,642
3,905
()
( mn)
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
12,00,000
10,00,000
8,00,000
6,00,000
4,00,000
EV
16x
Apr-16
Jan-16
Nov-15
Jun-15
Aug-15
Mar-15
Dec-14
Jul-14
Oct-14
Feb-14
12x
May-14
Dec-13
Jul-13
8x
Sep-13
Apr-13
Jan-13
Nov-12
Apr-16
Jan-16
Jun-12
24x
Aug-12
15x
21x
Jan-12
12x
18x
Mar-12
Hero MotoCorp
Nov-15
Jun-15
Aug-15
Mar-15
Dec-14
Jul-14
Oct-14
Feb-14
May-14
Dec-13
Jul-13
Sep-13
Apr-13
Jan-13
Nov-12
Jun-12
Aug-12
Jan-12
Mar-12
2,00,000
20x
15
P/E movement
(Times)
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
25
+1 std dev
20
15
-1 std dev
10
Apr-16
Apr-16
Jan-16
Nov-15
Jun-15
Aug-15
Mar-15
Dec-14
Jul-14
Oct-14
Feb-14
May-14
Dec-13
Jul-13
Sep-13
Apr-13
Jan-13
Nov-12
Jun-12
Aug-12
Jan-12
Mar-12
Jan-16
Nov-15
Jun-15
Aug-15
Mar-15
Dec-14
Jul-14
Oct-14
Feb-14
May-14
Dec-13
Jul-13
Sep-13
Apr-13
Jan-13
Nov-12
Jun-12
Aug-12
Mar-12
Jan-12
Median PE
500
()
('000)
450
3,500
14,000
400
3,000
12,000
2,500
10,000
250
2,000
8,000
200
1,500
6,000
150
1,000
4,000
500
2,000
350
300
100
50
TTQ (RHS)
NIFTY 500
Apr-16
Dec-15
Jul-15
Feb-15
Sep-14
May-14
Dec-13
Jul-13
Mar-13
Oct-12
May-12
Dec-11
Aug-11
Oct-10
Mar-11
Jan-10
Apr-16
Jul-15
Dec-15
Feb-15
Sep-14
May-14
Jul-13
Dec-13
Oct-12
Mar-13
May-12
Dec-11
Mar-11
Aug-11
Oct-10
May-10
Jan-10
Hero MotoCorp
May-10
Hero MotoCorp
-Indexed to 100
Source: NSE, CRISIL Research
Peer comparison
M. cap
Company
RoE
EV/EBITDA
FY16E
FY17E
FY18E
FY16E
FY17E
FY18E
492,919
15.9
14.1
12.7
6.3
5.3
4.5
41.8
39.5
37.6
11.0
9.7
677,119
17.8
15.7
13.7
5.2
4.4
3.8
32.1
30.6
29.7
12.6
11.0
9.9
136,683
30.9
20.3
15.1
8.1
6.0
4.5
29.4
34.3
33.9
17.8
13.0
10.4
17.8
15.7
13.7
5.2
4.4
3.8
29.4
30.6
29.7
12.6
11.0
9.9
Median
16
( mn)
Nature of report
Fundamental
grade
Fair value
Valuation
grade
CMP
(on the date of report)
03-Dec-09
Initiating coverage
5/5
1,747
3/5
1,693
28-Jan-10
5/5
1,775
4/5
1,565
21-Apr-10
5/5
1,937
3/5
1,852
10- Aug-10
5/5
1,910
3/5
1,865
09- Nov-10
5/5
1,893
3/5
1,829
25-Feb-11
5/5
1,893
5/5
1,505
05-May-11
5/5
1,797
4/5
1,598
22-Jul-11
5/5
1,797
3/5
1,789
20-Sep-11
Detailed Report
5/5
1,797
2/5
2,201
25-Oct-11
5/5
1,797
2/5
2,071
25-Jan-12
5/5
1,890
3/5
1,888
10-May-12
5/5
2,023
3/5
1,871
20-Jul-12
5/5
2,023
3/5
2,082
25-Oct-12
5/5
1,939
3/5
1,838
24-Jan-13
5/5
1,842
3/5
1,783
02-May-13
5/5
1,684
3/5
1,618
01-Aug-13
5/5
1,733
3/5
1,820
24-Oct-13
Detailed Report
5/5
1,882
3/5
2,085
06-Feb-14
5/5
1,939
3/5
1,985
02-Jun-14
5/5
2,033
2/5
2,391
08-Aug-14
5/5
2,433
3/5
2,592
03-Nov-14
5/5
3,090
3/5
3,011
20-Feb-15
5/5
3,090
4/5
2,659
18-May-15
5/5
2,729
3/5
2,521
01-Sep-15
5/5
2,729
3/5
2,384
03-Nov-15
5/5
2,729
3/5
2,583
07-Mar-16
5/5
2,910
3/5
2,836
29-Apr-16
Detailed report
5/5
3,251
4/5
2,897
17
Manufacturing unit
The company has four manufacturing facilities - Haryana (Dharuhera and Gurgaon, set up in
1985 and 1997, respectively), Uttarakhand (Haridwar, set up in 2008) and Rajasthan
(Neemrana set up in 2015). Its total annual manufacturing capacity is 8 mn as of FY16. It
plans to set up the fifth plant in Gujarat and one in Andhra Pradesh subsequently. It has
commenced operations at Global Parts Center in Neemrana and R&D center in Kukus,
Rajashtan. Internationally, it plans to set up manufacturing facilities in Bangladesh and
Columbia.
Product profile
Motorcycles and scooters constitute 86.5% and 13.5%, respectively, of the companys overall
sales volume in FY16.
Segment
Motorcycles
100 cc
HF Dawn, HF Deluxe, Splendor Plus, Splendor, Passion, Passion Pro and variants
125 cc
Segment
Scooters
100 cc
Pleasure
110 cc
Maestro, Duet
Distribution network
Hero has a very strong distribution network, with ~6,000 customer touch points - a mix of
dealers and service centres across India.
Milestones
1983
Signed joint collaboration agreement with Honda Motor Co. Ltd of Japan
1984
1985
1994
1997
2003
Became the first Indian company to cross the cumulative 7 mn sales mark
2004
2005
th
Received India's most preferred two-wheeler brand award from CNBC Awaaz in the automobiles category
2006
One of the eight Indian companies to enter Forbes top-200 list of world's most reputed companies
2009
Received 'Two Wheeler Manufacturer of the Year' award from NDTV Profit Car & Bike Awards 2009
18
2010
2011
Honda transferred its entire 26% stake in Hero MotoCorp to Munjals, bringing an end to the joint venture. After
this, the company was renamed Hero MotoCorp Ltd
2012
2013
Entered into an alliance with Engines Engineering, Italy for engine design
2014
2015
Commenced operations at fourth plant and Global parts center at Neemrana, Rajashtan; R&D Center at Kukus,
Rajasthan
Technological partner EBR - declared bankrupcy
19
Balance Sheet
FY14
FY15
FY16E
FY17E
2,53,135
2,75,327
2,78,298
3,16,472
35,533
34,895
43,211
50,032
14.0%
12.7%
15.5%
15.8%
FY18E
56,077
15.7%
11,076
5,405
4,285
4,805
5,512
EBIT
24,458
29,490
38,926
45,227
50,565
Operating PBT
Other income
Exceptional inc/(exp)
PBT
Tax provision
Minority interest
PAT (Reported)
Less: Exceptionals
Adjusted PAT
FY14
FY15
FY16E
FY17E
399
399
399
399
399
55,836
65,186
75,910
88,376
96,303
56,235
65,585
76,309
88,775
96,703
-
118
117
28
Convertible debt
24,339
29,373
38,898
45,227
50,565
Other debt
1,000
492
4,266
5,152
3,834
4,242
4,487
Total debt
1,000
492
(1,803)
28,881
32,722
42,732
49,469
7,862
9,316
12,093
13,851
276
55,052
Total liabilities
55,175
65,850
76,066
88,040
95,967
15,414
Assets
18,974
28,509
34,998
42,693
47,422
7,159
5,275
5,500
7,000
3,241
26,133
33,784
40,498
49,693
50,663
6,536
6,627
6,627
6,627
6,627
23,406
30,639
35,617
39,637
(1,803)
25,209
30,639
35,617
39,637
20,743
(735)
(1,060)
(735)
21,019
276
FY18E
3,58,054 # Liabilities
Depreciation
Interest
( m n)
(735)
(735)
Current assets
Ratios
Inventory
FY14
FY15
5.6
8.8
EBITDA (%)
7.9
FY16E
6,696
8,614
9,912
11,272
12,753
11,406
13,718
15,249
17,341
19,619
7,121
11,292
11,414
13,450
15,217
687
1,545
2,138
4,096
10,807
12.1
Marketable securities
35,034
25,171
25,171
25,171
25,171
16.2
11.3
60,944
60,341
63,884
71,330
83,568
16.2
11.3
44,824
39,956
34,943
39,610
44,891
16,120
20,385
28,941
31,720
38,677
6,386
5,055
55,175
65,850
76,066
88,040
95,967
FY17E
FY18E
1.1
13.7
13.1
(1.8)
23.8
15.8
(2.1)
21.5
21.5
(2.1)
21.5
21.5
Grow th
Profitability
EBITDA margin (%)
EBIT margin (%)
Sundry debtors
Intangibles/Misc. expenditure
14.0
15.5
15.8
15.7
14.1
Total assets
10.7
14.0
14.3
8.2
9.2
11.0
11.3
11.1
RoE (%)
39.0
41.4
43.2
43.2
42.7
Cash flow
RoCE (%)
45.9
48.0
54.3
54.6
54.5
( m n)
RoIC (%)
54.2
56.7
54.6
54.6
56.1
Pre-tax profit
28,605
34,525
42,732
49,469
55,052
(10,246)
(8,992)
(12,093)
(13,851)
(15,414)
Depreciation
11,076
5,405
4,285
4,805
5,512
(13,270)
(7,964)
28,702
17,668
26,961
39,602
44,903
Capital expenditure
(9,712)
(11,725)
(5,945)
(14,000)
(6,482)
(4,871)
9,773
(14,583)
(1,952)
(5,945)
(14,000)
(6,482)
9.7
12.7
Valuations
Price-earnings (x)
28.4
23.4
19.2
16.5
14.9
Price-book (x)
10.5
9.0
7.7
6.6
6.1
EV/EBITDA (x)
15.6
16.1
13.0
11.2
9.9
2.2
2.1
2.0
1.8
1.6
61.8
51.2
55.6
55.6
68.4
2.2
2.0
2.9
3.4
4.6
EV/Sales (x)
Dividend payout ratio (%)
Dividend yield (%)
FY14
(734)
FY15
FY16E
FY17E
(821)
FY18E
(246)
B/S ratios
Inventory days
12
15
17
17
17
Debt raised/(repaid)
Creditors days
49
49
42
42
42
Debtor days
15
17
19
19
19
(29)
(17)
(3)
7.6
6.8
5.4
5.0
4.8
13.4
11.6
8.8
8.1
7.9
Closing cash
10.5
9.2
7.5
7.0
7.1
1.4
1.5
1.8
1.8
1.9
Debt-equity (x)
0.0
0.0
0.0
0.0
0.0
(0.6)
(0.4)
(0.4)
(0.3)
(0.4)
( m n)
207
252
1,399
Operating Incom e
301
298
1,553
Change (q-o-q)
Change (q-o-q)
FY14
628
(14,781)
(662)
(508)
(492)
(14,219)
(19,915)
(23,151)
(1,639)
(14,858)
(20,423)
0
(23,644)
(31,710)
0
(31,710)
858
593
1,958
6,712
1,545
2,138
4,096
10,807
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
68,393
-1.1%
67,939
-0.7%
69,553
2.4%
68,371
-1.7%
72,948
6.7%
7,380
-14.2%
7,486
1.4%
9,449
26.2%
9,744
3.1%
10,260
5.3%
687
FY16E
FY17E
FY18E
EBIT m argin
10.8%
11.0%
13.6%
14.3%
14.1%
103.9
126.2
153.4
178.4
198.5
Reported PAT
5,830
4,765
7,503
7,721
7,959
CEPS
159.3
153.3
174.9
202.4
226.1
Adj PAT
5,830
6,316
7,503
7,721
7,959
Book value
281.6
328.4
382.1
444.5
484.2
Change (q-o-q)
Dividend ()
65.1
60.0
85.2
99.1
135.7
199.7
199.7
199.7
199.7
199.7
Adj EPS ()
20
FY15
(15,199)
1,000
Quarterly financials
EBIT
Per share
(210)
-23.6%
8.3%
18.8%
2.9%
3.1%
8.5%
9.3%
10.8%
11.3%
10.9%
Adj EPS
29.2
31.6
37.6
38.7
39.9
Focus Charts
Leadership position in motorcycles
(%)
( bn)
350
48%
48%
46%
45%
44%
44%
13.7%
16.0%
13.1%
14.0%
300
12.0%
250
32%
32%
8.8%
31%
27%
26%
25%
200
10.0%
8.0%
5.6%
6.0%
150
11%
7% 7%
8%
12%
8%
8%
6%
7%
14%
14%
5%
5%
6%
7%
9%
FY11
FY12
FY13
FY14
FY15
FY16
Hero
Honda
Bajaj
2.0%
8%
5%
TVS
50
253
275
278
0.0%
358
-2.0%
FY14
Others
FY15
FY16E
FY17E
Operating Income
FY18E
Growth (RHS)
(%)
60,000
50,000
316
( mn)
4.0%
1.1%
100
15.8%
15.5%
18.0%
15.7%
16.0%
14.0%
12.7%
14.0%
40,000
12.0%
10.0%
30,000
8.0%
20,000
6.0%
60.0
51.3
51.6
50.8
41.4
42.4
41.8
41.0
FY15
FY16E
FY17E
FY18E
48.0
45.9
50.0
40.0
39.0
30.0
20.0
4.0%
10,000
35,533
34,895
43,211
50,032
56,077
FY14
FY15
FY16E
FY17E
FY18E
2.0%
10.0
0.0%
EBITDA
FY14
RoE (%)
RoCE (%)
()
('000)
3,500
14,000
3,000
12,000
2,500
10,000
350
2,000
8,000
300
1,500
6,000
250
1,000
4,000
500
2,000
150
100
50
Apr-16
Dec-15
Jul-15
Feb-15
Sep-14
May-14
Jul-13
Dec-13
Oct-12
Hero MotoCorp
Mar-13
Dec-11
May-12
Mar-11
Hero MotoCorp
200
Aug-11
Apr-16
Jul-15
Dec-15
Feb-15
Sep-14
May-14
Jul-13
Dec-13
Oct-12
May-12
Aug-11
Mar-13
400
Oct-10
TTQ (RHS)
Dec-11
Oct-10
Mar-11
Jan-10
May-10
450
Jan-10
500
May-10
NIFTY 500
-Indexed to 100
Source: NSE, BSE, CRISIL Research
21
RESEARCH
CRISIL Research
manish.jaiswal@crisil.com
Analytical Contacts
Prasad Koparkar
prasad.koparkar@crisil.com
Binaifer Jehani
binaifer.jehani@crisil.com
Manoj Damle
manoj.damle@crisil.com
Manoj Mohta
manoj.mohta@crisil.com
Jiju Vidyadharan
jiju.vidyadharan@crisil.com
Ajay Srinivasan
ajay.srinivasan@crisil.com
Rahul Prithiani
rahul.prithiani@crisil.com
bhaskar.bukrediwala@crisil.com
Miren Lodha
miren.lodha@crisil.com
Director
Business Development
Prosenjit Ghosh
prosenjit.ghosh@crisil.com
Megha Agrawal
Associate Director
megha.agrawal@crisil.com
Neeta Muliyil
Associate Director
neeta.muliyil@crisil.com
Dharmendra Sharma
Associate Director
(North)
dharmendra.sharma@crisil.com
Ankesh Baghel
Regional Manager
(West)
ankesh.baghel@crisil.com
Sonal Srivastava
Regional Manager
(West)
sonal.srivastava@crisil.com
Sarrthak Sayal
Regional Manager
(North)
sarrthak.sayal@crisil.com
Priyanka Murarka
Regional Manager
(East)
priyanka.murarka@crisil.com
Sanjay Krishnaa
Regional Manager
sanjay.krishnaa@crisil.com
RESEARCH
Our Capabilities
Making Markets Function Better
Economy and Industry Research
Acknowledged premium, high quality research provider with track record spanning two decades
95% of Indias commercial banking industry by asset base uses our industry research for credit decisions
Coverage on 86 industries: We provide analysis and forecast on key industry parameters including demand, supply,
prices, investments and profitability, along with insightful opinions on emerging trends and impact of key events
Research on sectors and clusters dominated by small and medium enterprises covering analysis of relative attractiveness,
growth prospects and financial performance
High-end customised research for many leading Indian and global corporates in areas such as market sizing, demand
forecasting, project feasibility and entry strategy
Largest and most comprehensive database on Indias debt market, covering more than 18,000 securities
Provide valuation for more than 81 trillion (US$ 1,275 billion) of Indian debt securities
Sole provider of fixed income and hybrid indices to mutual funds and insurance companies; we maintain 37 standard
indices and over 100 customised indices
Ranking of Indian mutual fund schemes covering 75% of assets under management and 9 trillion (US$ 144 billion)
by value
Business review consultants to The Employees Provident Fund Organisation (EPFO) and The National Pension System
(NPS) Trust in monitoring performance of their fund managers
Assigned the first IPO grade in India; graded more than 100 IPOs till date
Due Diligence and Valuation services across sectors; executed close to 100 valuation assignments
Due Diligence, IPO Grading and Independent Equity Research for SME companies planning to list or already listed in NSE
Emerge platform
First research house to release exchange-commissioned equity research reports in India; covered 1,488 firms listed and
traded on the National Stock Exchange
Executive Training
Conducted 1200+ training programs on a wide spectrum of topics including credit, risk, retail finance, treasury, and
corporate advisory; trained more than 24,000 professionals till date
Training programs being conducted in India, Sri Lanka and Bangladesh through an extensive network of well-qualified
financial professionals
Our Office
Ahmedabad
706, Venus Atlantis
Nr. Reliance Petrol Pump
Prahladnagar, Ahmedabad, India
Phone: +91 79 4024 4500
Fax: +91 79 2755 9863
Hyderabad
3rd Floor, Uma Chambers
Plot No. 9&10, Nagarjuna Hills,
(Near Punjagutta Cross Road)
Hyderabad - 500 482, India
Phone: +91 40 2335 8103/05
Fax: +91 40 2335 7507
Bengaluru
W-101, Sunrise Chambers,
22, Ulsoor Road,
Bengaluru - 560 042, India
Phone: +91 80 2558 0899
+91 80 2559 4802
Fax: +91 80 2559 4801
Kolkata
Horizon, Block 'B', 4th Floor
57 Chowringhee Road
Kolkata - 700 071, India
Phone: +91 33 2289 1949/50
Fax: +91 33 2283 0597
Chennai
Thapar House,
43/44, Montieth Road, Egmore,
Chennai - 600 008, India
Phone: +91 44 2854 6205/06
+91 44 2854 6093
Fax: +91 44 2854 7531
Pune
1187/17, Ghole Road,
Shivaji Nagar,
Pune - 411 005, India
Phone: +91 20 2553 9064/67
Fax: +91 20 4018 1930
Gurgaon
Plot No. 46
Sector 44
Opp. PF Office
Gurgaon - 122 003, India
Phone: +91 124 6722 000
YouTube
CRISIL Limited
CRISIL House, Central Avenue,
Hiranandani Business Park, Powai, Mumbai 400076. India
Phone: +91 22 3342 3000 | Fax: +91 22 3342 8088
www.crisil.com
CRISIL Ltd is a Standard & Poor's company