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Hero MotoCorp shares gain 2%; brokerages bullish, expect double-digit returns

Brokerages expect healthy growth on the back of a strong brand, wide distribution network and new product launches.

September 11, 2020 / 08:38 PM IST
 
 
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Hero MotoCorp share price gained nearly 2 percent intraday on September 11 as brokerage remained bullish on the stock on strong rural demand.

Expecting robust demand and pricing, brokerage house CLSA maintained "buy" rating on the stock with a target of Rs 3,315 per share, implying a 12.4 percent upside from current levels.

"The utilisation currently exceeded 90 percent as the supply chain has eased. The company is preparing to increase inventory ahead of the festive season. The second round of price hikes should protect original equipment manufacturers per-unit gross margin," said the research firm.

Price hikes appeared to have been absorbed by the market, it said, adding the rural segment led the recovery but the urban business, too, was picking up.

A bumper kharif season along with pent-up demand and record procurement of food grains by the government boded well for the rural economy and allied sectors like agrochemicals, two-wheelers and tractors, Jyoti Roy-DVP- Equity Strategist at Angel Broking said.

In the two-wheeler space, Hero Motocorp is Angel's top pick, with a target price of Rs 3,422, implying a 16 percent upside from current levels. Roy expects greater demand for the entry level two-wheelers driven by an increased preference for personal transport in the aftermath of the coronavirus outbreak.

Hero MotoCorp has around 66 percent market share in 75-125CC motorcycle segment, which contributes 89 percent to the company's revenue.

In August, the company reported better growth compared to its peers with its products finding good traction in rural pockets.

"Further, the expected reduction in the GST rate would boost the revenue for the company. Going forward, we expect healthy growth on the back of a strong brand, wide distribution network and new product launches," Roy said.

At 1105 hours, Hero MotoCorp share was trading at Rs 2,991.95 on the BSE, up 1.47 percent.

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.

Moneycontrol News
first published: Sep 11, 2020 11:23 am

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