Reviews
In this edition, we have reviewed Hero MotoCorp Ltd. and Prestige Estates Projects Ltd. . We suggest our readerinvestors to HOLD in Hero MotoCorp Ltd. and Prestige Estates Projects Ltd.
We had previously recommended Hero MotoCorp Ltd. (HMCL) in Volume No. 35, Issue No. 26 under the ‘Cover Story’ segment. The recommended price for the stock was Rs 2,968.95. We had recommended the stock on the basis of predicted positive trend of demand in the twowheeler and scooter market. Hero MotoCorp Limited, formerly Hero Honda, is an Indian multinational motorcycle and scooter manufacturer located in New Delhi.
Taking a look at the financial performance of the company, on a consolidated quarterly basis the net sales and other operating income was recorded at Rs 8,689.74 crore in Q4FY21 as compared to Rs 6,333.89 crore in Q4FY20, giving an increase of 37.19 per cent. The operating profit rose up significantly by 53.62 per cent from Rs 842.94 crore in Q4FY20 to Rs 1,294.91 crore in Q4FY21. The net profit surged up by 35.29 per cent in the quarter which registered at Rs 847.53 crore in Q3FY21 as compared to net profit of Rs 626.47 crore in Q3FY20. On the annual front the net sales and operating income rose by 5.82 per cent from Rs 29,255.32 crore in FY20 to Rs 30,959.19 crore in FY21. Meanwhile, the operating profit squeezed by 2.8 per cent in FY21 as compared to FY20.
The net profit on annual basis declined by 17.72 per cent, recording at Rs 2,982.61 crore in FY21 as compared to Rs 3,624.78 crore in FY20. The company witnessed volume growth that can be attributed to rising market share with improved business sentiments. The scooter segment saw a boost in sales as HMCL regained market share in this segment. Also, the parts business grew competitively as the distribution chain improved. The company has also entered into several partnerships to cater customers needs with hi-tech and innovative products. Hence, we recommend HOLD.
We had previously recommended Prestige Estates Projects Ltd. in Volume No. 35, Issue No. 26 under the ‘Cover Story’ segment. The recommended price for the stock was Rs 247.40. We had recommended the stock on the basis of expected growth in the number of housing units in urban areas which will boost demand for commercial and retail office spaces. Located in Bangalore, Prestige Group is a property development company in South India.
The financial performance of the company indicates that on a consolidated quarterly basis the net sales and other operating income was recorded at Rs 1,847.60 crore in Q4FY21 as compared to Rs 2,680.90 crore in Q4FY20, giving a decrease of 31.08 per cent.
The operating profit dipped by 28.06 per cent from Rs 734.20 crore in Q4FY20 to Rs 528.20 crore in Q4FY21. The net profit declined by 53.59 per cent in the quarter which registered at Rs 99 crore in Q3FY21 as compared to net profit of Rs 213.30 crore in Q3FY20. On the annual front, the net sales and operating income rose by 57.1 per cent from Rs 5,171.90 crore in FY20 to Rs 8,124.80 crore in FY21. The operating profit rose by 58.01 per cent in FY21 as compared to FY20.
The net profit on annual basis surged up by 32.34 per cent, recording at Rs 544.20 crore in FY21 as compared to Rs 411.20 crore in FY20. PEPL has initiated a new asset capex cycle in Bengaluru and Mumbai. This may see some saturation creeping into the residential segment for PEPL. The company intends to be largely debt-free in its residential business. In future, debt will be a function of the new capex on office and retail assets. The increasing flow of FDI in Indian real estate is encouraging increased transparency and improving bullish sentiments. Hence, we recommend HOLD.
(Closing price as of May 28, 2021)