Buzz Of Better Prospects Revs Up Hero Honda

The bullish run on Hero Honda counter continued today following its better-than-expected third-quarter results. The scrip rose 2.09 per cent to Rs 298.35 on the Bombay Stock Exchange. The stock has seen much volatility on profit-taking after the third-quarter results that were announced after trading hours yesterday. In some intraday trades, the stock plunged 4.6 per cent on Tuesday but ended less than 1 per cent lower at Rs 292.25.

The motorcycle major on Monday announced a sharp surge in net profit accompanied by a rise in profit margins due to aggressive cost-cutting.

For the third quarter ended December 2001, the company registered a 44 per cent growth in topline to Rs 1,219.47 crore, while the net profit almost doubled to Rs 133.22 crore compared with Rs 70.18 crore in the corresponding quarter of the previous year.

The results were far ahead of analysts' expectations in terms of net profit even as the topline growth was in line with expectations. Analysts had expected the net profit of the company to rise by 42.5-70.9 per cent to Rs 100-120 crore during the quarter.

The company is riding high on strong rural sales on the back of a good well-spread monsoon. Earlier this month, the company raised its target for motorcycle sales for fiscal 2002 to 14 lakh units from 13 lakh units.

In a research note released following the third-quarter results, Kotak Securities has raised the company's fiscla 2002 and fiscal 2003 earnings per share (EPS) estimate by 14.7 per cent for each year to Rs 21.80 and Rs 28.10 respectively.

The annualised EPS, based on its first nine months (April-December 2001) performance, was Rs 20.70. The scrip discounts its projected fiscal 2002 EPS of Rs 21.8 by a PE multiple of 13.6.