PL: Hero Honda-Marketperformer

According to the brokerage house, India's leading motorcycle manufacturer, Hero Honda, announced disappointing results again as its PAT tumbled 20.1% yoy to Rs 2.09bn (they expected Rs 2.64bn) despite a strong top-line growth. Net sales were up 15.2% yoy to Rs 26.66bn as HH's two-wheeler sales in the quarter grew faster than the industry (12.3% v/s 9.9%), registering a 93-bp gain in market share to 41.9%.

They expect no profit growth in FY07, as the absolute EBITDA decline in the nine-month period has been a revelation. They have lowered their PAT estimates by 10.5% and 11.4% for FY07 and FY08 respectively.They downgrade the stock to a Market Performer rating, on a valuation of 12.9x FY08E EPS of Rs 55.6.

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