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Hero MotoCorp Q1: Brokerages maintain rating but cut target price despite a 38%

Global brokerage firms such as Credit Suisse, Morgan Stanley and CLSA have maintained their ratings on Hero MotoCorp but slashed target price after the company reported its earnings for the quarter ended June 2019.

India's largest two-wheeler maker posted a whopping 38.3 percent YoY increase in Q1 FY20 profit on account of one-time gain with respect to reversal of a calamity fund.

Profit during the quarter increased stood at Rs 1,256.7 crore, against Rs 909.2 crore in the corresponding quarter of the previous fiscal.

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Revenue from operations declined 8.8 percent YoY to Rs 8,030.3 crore in April- June quarter, with sales volume degrowth at 12.5 percent YoY.

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CLSA maintained its sell rating on Hero MotoCorp post-June quarter results but slashed its target price to Rs 2,100 from Rs 2,350 earlier.

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The global investment bank has also slashed FY20-21 EPS estimate by 4-6 percent. It remains cautious on India’s 2-wheeler industry given the weak demand.

The company will find it tough to pass on the full cost impact of BS-VI implementation. The valuation is still not cheap in the context of a lacklustre earnings outlook.

Meanwhile, Credit Suisse maintained its outperform rating on Hero MotoCorp quarter results but slashed its target price to Rs 2,710 from Rs 2,920 earlier.

The demand remains uncertain in the near term, but at the same time valuations remain supportive. The global investment bank slashed volume estimates from +2 percent to -4 percent for FY20.

Morgan Stanley also maintained its underweight call on Hero MotoCorp post Q1 results but reduced its target price to Rs 2,143 from Rs 2,459 earlier.

The June quarter operating results were in-line with Morgan Stanley estimates. Emissions & electrification risks reduce the visibility on earnings. The global investment slashed EPS estimates by 8 percent for FY20 and 15 percent each for FY21 and FY22, said the note.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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tags #Buzzing Stocks #Hero Motocorp

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