Analysts boost Hero Honda estimates

Analysts boost Hero Honda estimates
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First Published: Tue, Sep 16 2008. 11 28 PM IST
Updated: Tue, Sep 16 2008. 11 28 PM IST
Mumbai: Amid a slowing economy, several analysts upgraded their earnings estimates for industry leader Hero Honda Motors Ltd following a rise in its two-wheeler sales.
Of the eight analysts who track Hero Honda and Mint spoke to, a majority said they upgraded their estimates for the company that sold 305,516 two-wheelers in August, a growth of 27% over the year-ago month.
Ahead of the start of India’s festive season, which usually results in higher two-wheeler sales, analysts estimate Hero Honda to post high, double-digit sales growth of 12-14% against the industry’s expected average of 8%.
S. Arun, an analyst with DSP Merrill Lynch, in a report earlier this month said double-digit sales growth and steady margins as well as tax-related incentives from its recently commissioned plant at Haridwar in Uttarakhand would likely result in Ebitda (earnings before interest, tax, depreciation and amortization) growth of 15.1% a year through fiscal 2011 for the company.
Joseph George, a consumer analyst with BNP Paribas, raised his 2008-09 estimated earnings per share growth rate for the company to 20.5% from the earlier view of 12.7%.
Piyush Parag, an associate vice-president with Religare Securities Ltd, expects the company to lower ex-showroom prices of entry-level bikes to gain market share.
“On the back of robust volume growth displayed by the company in the first half of fiscal 2008 and two price hikes, which is higher than our estimates, we will revise our numbers upwards,” Parag said.
Hitesh Kuvelkar, associate director with First Global, is also bullish on the company’s performance and plans to upgrade his estimates. “We expect volume growth of 13-14% during fiscal 2009 and Ebitda margin of 13.3%,” he said.
However, Mahantesh Sabarad, analyst with Centrum Broking Pvt. Ltd, says growth being witnessed by Hero Honda is not unusual for this time of the year and expects rival Bajaj Auto Ltd to catch up soon.
“As it’s not a sustainable growth, I will not be upgrading my estimates for the company,” said Sabarad who adds that he had already expected the firm to grow sales at 11.3%.
Hero Honda shares rose 3.57% to Rs854.75 on the Bombay Stock Exchange Tuesday, a day when the benchmark Sensex ended almost flat.
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First Published: Tue, Sep 16 2008. 11 28 PM IST