1. CMP 2619.00
Target Price 2880.00
ISIN: INE158A01026
JUNE 3rd
, 2015
HERO MOTOCORP LIMITED
Result Update (PARENT BASIS): Q4 FY15
BUYBUYBUYBUY
Index Details
Stock Data
Sector Automobiles
BSE Code 500182
Face Value 2.00
52wk. High / Low (Rs.) 3271.80/2252.00
Volume (2wk. Avg.) 30000
Market Cap (Rs. in mn.) 523014.30
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 275853.00 297921.24 318775.73
EBITDA 40349.20 42662.57 47299.73
Net Profit 23856.40 27044.01 30096.04
EPS 119.46 135.42 150.71
P/E 21.92 19.34 17.38
Shareholding Pattern (%)
1 Year Comparative Graph
HERO MOTOCORP LTD S&P BSE SENSEX
SYNOPSIS
Hero MotoCorp Ltd (HMCL) is the world’s largest
manufacturer of two-wheelers based in India.
With quarterly sales of 15,75,501 units of two-
wheeler for the period, the company’s total turnover
(Net Sales & other Operating Income) in the quarter
stood at Rs.67938.7 mn compared to Rs. 65129.6
mn in the corresponding quarter in previous fiscal.
EBIDTA margin for the quarter stood at 12.34%.
Profit before exceptional item and tax stood at Rs
8407.6 mn. Profit after Tax (PAT) after exceptional
item for the quarter stood at Rs 4765.3mn.
Hero MotoCorp Ltd has recommended a final
dividend @ 1500% i.e. Rs. 30/- per equity share of
Rs. 2/- each for the financial year 2014-15.
Hero MotoCorp reported earnings per share (EPS)
before exceptional item Rs 127.23 and after
exception item Rs. 119.46 for the year.
Hero MotoCorp has lined up an investment of over
Rs. 30,000 mn in adding capacities and brand
building initiatives in domestic and global markets
over the next two years.
The Company posted a net profit of Rs. 23856.40 mn
for the year ended March 31, 2015 as compared to
Rs. 21090.80 mn for the year ended March 31, 2014.
Total Income has increased from Rs. 257218.50 mn
for the year ended March 31, 2014 to Rs. 280780.40
mn for the year ended March 31, 2015.
Hero MotoCorp plans to launch its operations in
Europe by 2015 and in the US by 2016.
Net Sales and PAT of the company are expected to
grow at a CAGR of 8% and 9% over 2014 to 2017E
respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Hero Motocorp Ltd 2619.00 523014.30 119.46 21.92 8.00 3000.00
Bajaj Auto Ltd 2324.00 672489.00 97.24 23.90 5.41 500.00
TVS Motor Company ltd 234.80 111550.50 7.32 32.08 6.33 190.00
Eicher Motors Ltd 18945.20 514217.90 225.39 84.06 41.68 500.00

2. QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q4 FY15,
Hero MotoCorp Ltd. (Formerly Hero Honda Motors
Ltd.) is the world's largest manufacturer of two -
wheelers, based in India, reported its financial
results for the quarter ended 31st Mar, 2015.
Months Mar-15 Mar-14 % Change
Net Sales 67938.70 65129.60 4.31
PAT 4765.30 5544.30 (14.05)
EPS 23.86 27.76 (14.05)
EBITDA 9312.50 10171.50 (8.45)
The company’s net profit stood at Rs. 4765.30 million against Rs. 5544.30 million in the corresponding quarter
ending of previous year. Revenue for the quarter rose by 4.31% to Rs. 67938.70 million from Rs. 65129.60
million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.
23.86 a share during the quarter, registering 14.05% decrease over previous year period. Profit before interest,
depreciation and tax is Rs. 9312.50 million as against Rs. 10171.50 million in the corresponding period of the
previous year.
Break up of Expenditure
Break up of
Expenditure
Rs. In Millions
Q4 FY15 Q4 FY14
%
Change
Cost of Material
Consumed
47608.40 46580.90 2%
Other Expenditure 8819.40 7032.90 25%
Employee Benefit
Expenses
3039.70 2356.90 29%
Depreciation &
Amortization
Expense
897.40 2728.40 -67%

3. Latest Updates
• Hero MotoCorp Ltd. (HMCL) has lined up an investment of over Rs. 3000 crores in adding capacities and
brand building initiatives in domestic and global markets over the next two years. This is in keeping with the
company’s vision of expanding its global footprint to 50 countries and total annual sales of 12 million units
by the year 2020.
• Hero MotoCorp Ltd has recommended a final dividend @ 1500% i.e. Rs. 30/- per equity share of Rs. 2/- each
for the financial year 2014-15.
Business Highlights: FY ‘15
• Global foray
Launch of brand ‘Hero’ and its range of products in Colombia, Bangladesh, Nicaragua, Democratic
Republic of Congo, Mozambique, Angola and Ethiopia.
The company formed a wholly-owned subsidiary in Colombia and commenced construction of a state-of-
the-art manufacturing plant in the country.
HMCL is also building a plant in Bangladesh as part of a joint venture with the Nitol Niloy Group.
• New facilities
In Oct 2014, the state-of-the-art platinum-class manufacturing plant - ‘Garden Factory’- of Hero MotoCorp
Ltd went on stream at Neemrana in Rajasthan.
In June 2014, HMCL also made its Global Parts Centre (GPC) at Neemrana operational.
• New Product launches
Launches the new Karizma, ZMR, Xtreme, Passion Pro TR, Splendor Pro Classic, Splendor iSmart, HF
Deluxe Eco, and the Pleasure Scooter
• Sales Performance
Retailes a whopping more than One Million (10 Lakh) two-wheelers during the 37-day festive period,
which started on 25th September (first day of Navratras) and lasted until 31st October 2014.
On Dhanteras, for the first time, HMCL’s total sales to end-customers across the country surpass the
200,000 mark, which is a growth of over 80 per cent over Dhanteras day last year.

4. In September 2014, HMCL clocks a record 6,04,052 units of two-wheelers. Hero MotoCorp had crossed
the figure of 6-lakh plus in monthly sales in only two previous occasions – in October 2013 when it sold
6.25 units.
In May 2014, HMCL sells 602,483 units – all-time high dispatch sales in a non-festive month.
Record sales for a financial year with 66,31,826 units sold in FY ’15.
COMPANY PROFILE
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of two - wheelers,
based in India. HMCL sells more than 6 million two-wheelers annually. Hero MotoCorp Limited manufactures
and sells motorized two-wheelers and spare parts, as well as provides related services in India. The company
provides motorcycles and scooters.
In 2014, Hero MotoCorp formed a wholly-owned subsidiary in Colombia and commenced construction of a
state-of-the-art manufacturing plant in the country. The 100% subsidiary – HMCL Colombia SAS – has been
incorporated in the industrial city of Cali, 300 kms southwest of Bogota.
The company’s state-of-the-art manufacturing plant - spread over 17 acres of land at the Parque Sur Free Trade
Zone in Vila Rica - is expected to go on stream by the middle of calendar year 2015 with an initial installed
capacity of 78,000 units. This will go up to around 150,000 units by 2017-18. With this, Hero MotoCorp will be
the first Indian two-wheeler company to have a manufacturing plant in Latin America.
Hero MotoCorp, in partnership with its local distributors, also operates three assembly plants in Africa – in
Kenya, Tanzania and Uganda. With two more new plants coming up – one in Colombia and the other in
Bangladesh through a joint venture – the company is fast building up a global manufacturing base to cater to
growing international markets.
HMCL has fast expanded its global footprint since it commenced its solo journey in 2011. As of today, Hero
products sell in India, Sri Lanka, Nepal, Bangladesh, Turkey & Egypt in Asia; Peru & Ecuador and now Colombia
in South America; Guatemala, Honduras, El Salvador and Nicaragua in Central America; Kenya, Mozambique,
Tanzania & Uganda in East Africa; and Burkina Faso, Ivory Coast, Congo & Angola in West Africa.
By the year 2020, the company aims to cross 100 million units in cumulative production, and annual bike and
scooter sales of 12 million units. It also plans to have more than 20 manufacturing and assembly plants across
the globe with sales in more than 50 countries by that year.

5. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31, 2014 -2017E
HERO MOTOCORP LTD FY14A FY15A FY16E FY17E
SOURCES OF FUNDS
Shareholder's Funds
Share Capital 399.40 399.40 399.40 399.40
Reserves and Surplus 55599.30 65013.90 79967.10 91162.49
1. Sub Total - Net worth 55998.70 65413.30 80366.50 91561.89
Non Current Liabilities
Long Term Borrowing 244.50 313.30 357.16 396.45
Long Term Provisions 499.80 656.20 800.56 912.64
2. Sub Total - Non Current Liabilities 744.30 969.50 1157.73 1309.09
Current Liabilities
Trade Payables 22905.90 28418.70 32965.69 36921.58
Other Current Liabilities 5880.80 3074.90 2521.42 2294.49
Short Term Provisions 15443.30 7340.60 5578.86 6025.16
3. Sub Total - Current Liabilities 44230.00 38834.20 41065.97 45241.23
Total Liabilities (1+2+3) 100973.00 105217.00 122590.19 138112.21
APPLICATION OF FUNDS
Non-Current Assets
a) Fixed Assets 30973.60 36252.40 42777.83 48766.73
b) Deferred Tax Asset 1059.80 735.40 779.52 810.70
c) Non- Current Investments 8128.80 8637.80 9069.69 9432.48
d) Long Term loans and advances 4773.90 6168.20 7340.16 8441.18
e) Other non-current assets 478.10 601.90 710.24 816.78
1. Sub Total - Non Current Assets 45414.20 52395.70 60677.45 68267.87
Current Assets
Current Investment 32758.90 22903.30 26822.63 30309.57
Inventories 6695.50 8154.90 9459.68 10594.85
Trade receivables 9205.80 13895.90 16953.00 19495.95
Cash and Bank Balances 1175.00 1592.50 1974.70 2271.26
Short-terms loans & advances 5503.10 5676.60 5949.13 6306.08
Other current assets 220.50 598.10 753.61 866.65
2. Sub Total - Current Assets 55558.80 52821.30 61912.74 69844.35
Total Assets (1+2) 100973.00 105217.00 122590.19 138112.22

6. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 252754.70 275853.00 297921.24 318775.73
Other Income 4463.80 4927.40 5124.50 5380.72
Total Income 257218.50 280780.40 303045.74 324156.45
Expenditure -217354.10 -240431.20 -260383.16 -276856.72
Operating Profit 39864.40 40349.20 42662.57 47299.73
Interest -118.20 -110.90 -90.94 -100.03
Gross profit 39746.20 40238.30 42571.63 47199.70
Depreciation -11073.70 -5399.70 -4427.75 -4870.53
Exceptional Items 0.00 -1550.40 0.00 0.00
Profit Before Tax 28672.50 33288.20 38143.88 42329.17
Tax -7581.70 -9431.80 -11099.87 -12233.13
Net Profit 21090.80 23856.40 27044.01 30096.04
Equity capital 399.40 399.40 399.40 399.40
Reserves 55599.30 65013.90 79967.10 91162.49
Face value 2.00 2.00 2.00 2.00
EPS 105.61 119.46 135.42 150.71
Quarterly Profit & Loss Statement for the period of 30th Sep, 2014 to 30th June, 2015E
Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net sales 69153.40 68392.50 67938.70 72015.02
Other income 1935.10 936.00 928.80 975.24
Total Income 71088.50 69328.50 68867.50 72990.26
Expenditure -59805.20 -60174.60 -59555.00 -62941.13
Operating profit 11283.30 9153.90 9312.50 10049.13
Interest -49.40 -24.20 -7.50 -6.90
Gross profit 11233.90 9129.70 9305.00 10042.23
Depreciation -749.60 -837.50 -897.40 -951.24
Exceptional Items 0.00 0.00 -1550.40 0.00
Profit Before Tax 10484.30 8292.20 6857.20 9090.99
Tax -2850.60 -2462.40 -2091.90 -2645.48
Net Profit 7633.70 5829.80 4765.30 6445.51
Equity capital 399.40 399.40 399.40 399.40
Face value 2.00 2.00 2.00 2.00
EPS 38.23 29.19 23.86 32.28

7. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 105.61 119.46 135.42 150.71
EBITDA Margin (%) 15.77% 14.63% 14.32% 14.84%
PBT Margin (%) 11.34% 12.07% 12.80% 13.28%
PAT Margin (%) 8.34% 8.65% 9.08% 9.44%
P/E Ratio (x) 24.80 21.92 19.34 17.38
ROE (%) 37.66% 36.47% 33.65% 32.87%
ROCE (%) 90.57% 69.60% 58.34% 56.73%
EV/EBITDA (x) 12.27 12.36 11.59 10.38
Book Value (Rs.) 280.41 327.56 402.44 458.50
P/BV 9.34 8.00 6.51 5.71
Charts

8. OUTLOOK AND CONCLUSION
At the current market price of Rs.2619.00, the stock P/E ratio is at 19.34 x FY16E and 17.38 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.135.42 and
Rs.150.71 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 9% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 11.59 x for FY16E and 10.38 x for FY17E.
Price to Book Value of the stock is expected to be at 6.51 x and 5.71 x for FY16E and FY17E respectively.
We recommend ‘BUY’ in this particular scrip with a target price of Rs.2880.00 for Medium to Long term
investment.
INDUSTRY OVERVIEW
The Indian auto industry is one of the largest in the world with an annual production of 21.48 million vehicles in
FY 2013-14.
The automobile industry accounts for 22 per cent of the country's manufacturing gross domestic product (GDP).
An expanding middle class, a young population, and an increasing interest of the companies in exploring the rural
markets have made the two wheelers segment (with 80 per cent market share) the leader of the Indian
automobile market. The overall passenger vehicle segment has 14 per cent market share.
India is also a substantial auto exporter, with solid export growth expectations for the near future. Various
initiatives by the Government of India and the major automobile players in the Indian market is expected to
make India a leader in the Two Wheeler and Four Wheeler market in the world by 2020.
Investments
To match production with demand, many auto makers have started to invest heavily in various segments in the
industry in the last few months. The industry has attracted foreign direct investment (FDI) worth US$ 12,232.06
million during the period April 2000 to February 2015, according to the data released by Department of
Industrial Policy and Promotion (DIPP).

9. Some of the major investments and developments in the automobile sector in India are as follows:
• DSK Hyosung has announced to set up a plant in Maharashtra and is planning to add 10-15 dealerships in
the next financial year (FY 15-16) mostly in the tier-II cities and introduce more models in the 250cc
segment.
• Germany-based luxury car maker Bayerische Motoren Werke AG’s (BMW) local unit has announced to
procure components from seven India-based auto parts makers.
• Mahindra Two Wheelers Limited (MTWL) has acquired 51 per cent shares in France-based Peugeot
Motocycles (PMTC).
• Suzuki Motor Corp is planning to sell the automobiles made in the Gujarat plant, in Africa.
• Tata Motors Ltd, India’s largest automobile maker, will sell trucks in Malaysia, Vietnam and Australia to
strengthen its presence in the Asia-Pacific region.
Government Initiatives
The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI
under the automatic route. Excise duty on small cars, scooters, motorcycles and commercial vehicles was
reduced in February last year to 8 per cent from 12 per cent to boost the ‘Make in India’ initiative of the Indian
government.
Some of the major initiatives taken by the Government of India are:
• Under the Union budget of 2015-16, the Government has announced to provide credit of Rs 850,000 to
farmers, which is expected to boost the tractors segment. The government is aligning to ensure that at
least one family member is economically strong to support the family. This is expected to improve the
sentiments of entry-level two-wheelers.
• The Government plans to promote eco-friendly cars in the country i.e. CNG based vehicle, hybrid vehicle,
electric vehicle and also made mandatory of 5 per cent ethanol blending in petrol.
• The government has formulated a Scheme for Faster Adoption and Manufacturing of Electric and Hybrid
Vehicles in India, under the National Electric Mobility Mission 2020 to encourage the progressive
induction of reliable, affordable and efficient electric and hybrid vehicles in the country.
• The Automobile Mission Plan for the period 2006–2016, designed by the government is aimed at
accelerating and sustaining growth in this sector. Also, the well-established Regulatory Framework under
the Ministry of Shipping, Road Transport and Highways, plays a part in providing a boost to this sector.

10. Road Ahead
The vision of AMP 2006-2016 sees India, “to emerge as the destination of choice in the world for design and
manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for
more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016.”
The Japanese auto maker Maruti Suzuki expects the Indian passenger car market to reach four million units by
2020, up from 1.8 million units in 2013-14.
Disclaimer:
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purchase or sale of any financial instrument or as an official confirmation of any transaction. The information
contained herein is from publicly available data or other sources believed to be reliable but we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be
in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.

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