Hero Honda an outperformer: Karvy Stock Broking
Karvy Stock Broking has recommended an outperformer rating on Hero Honda Motors with a price target of Rs 1250 in its March 31, 2009 research report. “Hero Honda Motors Limited, HHML is the market leader in the Indian two wheeler space having presence in all the significant sub segments and categories. Better EBITDA margin and lower tax rate would help the net profit to grow strongly at a CAGR of 19% over FY08-FY11E. HHML is a debt free company having cash reserves of Rs 27 billion and the same is expected to double by FY11E. HHML enjoys strong return ratios with FY08 RoCE and RoE of 49.2% and 35.5% respectively. HHML is trading at 15.1x and 12.8x its FY10E and FY11E estimated earnings respectively.”
“We initiate coverage on the stock with an Outperformer rating and value the stock at Rs 1,250 (15.3x its FY11E EPS of Rs 81.7). In our view, HHML’s high return ratios, strong balance sheet, double digit earnings growth, negative working capital cycle, positive net cash flow and huge cash reserves justifies the premium valuations assigned to the stock,” says Karvy Stock Broking’s research report.
Tags: hero honda, Karvy Stock Broking, outperformer
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