Hero Motocorp In Red After Brokerages Hit The Brakes After Q1 Miss

Hero Motocorp shares were in the red after the largest two-wheeler manufacturer in the world's Q1 results missed estimates, prompting mixed views from brokerages. 

What Happened: Hero Motocorp saw its net profit increase 36.12% year on year to ₹1,122.63 crore and its revenue rise 15.69% to ₹10,143.73 crore. The two-wheeler manufacturer’s EBITDA rose 21% to ₹1,460 crore.

The numbers missed the analyst estimates of ₹1,183.96 crore net profit and revenue of ₹10,498.82 crore.  In the June quarter, Hero sold 15.35 lakh units of scooters and motorcycles compared with 13.53 lakh units in the previous year.

Brokerage Views: Goldman Sachs maintained a "sell" call on the stock with a target price of ₹4,250. The brokerage said the average selling price in Q1 was down 3% sequentially, which indicates some level of discounting due to channel inventory build up. The research firm said it sees risk to Hero's volume trajectory. 

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Jefferies held a "buy" call with a target price of ₹5,650. Though the company had good growth, EBITDA was a miss, the brokerage said.

EBITDA was below expectations due to lower than lower-than-expected average selling price and margin, it added. The research firm pointed out that the company has product launches in its pipeline for electric vehicle and internal combustion engine categories. 

Although JP Morgan maintained "overweight" call with a target price of ₹5,240, the brokerage also pointed out the weaker pricing In Q1 caused a miss on earnings. Average selling price and margins were lower than two wheeler peers like Bajaj Auto and TVS. The research firm said it expects some downward revisions to the consensus forecast based on the results.

Price Action: Shares of Hero Motocorp were down 1.65% to ₹5,158.95 on Wednesday morning. 

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