HERO MOTOCORP Income Statement Analysis

 Operating income during the year rose 4.7% on a year-on-year (YoY) basis.
 The company's operating profit decreased by 5.8% YoY during the fiscal. Operating profit
margins witnessed a fall and stood at 14.8% in FY19 as against 16.4% in FY18.
 Depreciation charges increased by 8.6% and finance costs increased by 20.7% YoY,
respectively.
 Other income grew by 31.3% YoY.
 Net profit for the year declined by 6.9% YoY.
 Net profit margins during the year declined from 11.3% in FY18 to 10.0% in FY19.

HERO MOTOCORP Income Statement 2018-19

No. of Mths Year Ending 12 Mar-18* 12 Mar-19* % Change
Net Sales Rs m 324,584 339,708 4.7%
Other income Rs m 5,232 6,867 31.3%
Total Revenues Rs m 329,815 346,576 5.1%
Gross profit Rs m 53,251 50,184 -5.8%
Depreciation Rs m 5,750 6,244 8.6%
Interest Rs m 308 372 20.7%
Profit before tax Rs m 52,424 50,435 -3.8%
Tax Rs m 15,699 16,380 4.3%
Profit after tax Rs m 37,222 34,664 -6.9%
Gross profit margin % 16.4 14.8
Effective tax rate % 29.9 32.5
Net profit margin % 11.3 10.0
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Company Reports, Regulatory Filings, Equitymaster

HERO MOTOCORP Balance Sheet Analysis

 The company's current liabilities during FY19 down at Rs 44 billion as compared to Rs 45 billion
in FY18, thereby witnessing an decrease of -1.6%.
 Long-term debt down at Rs 1 billion as compared to Rs 1 billion during FY18, a fall of 16.6%.
 Current assets fell 7% and stood at Rs 84 billion, while fixed assets rose 4% and stood at Rs 55
billion in FY19.
 Overall, the total assets and liabilities for FY19 stood at Rs 185 billion as against Rs 174 billion
during FY18, thereby witnessing a growth of 6%.

HERO MOTOCORP Balance Sheet as on March 2019

No. of Mths Year Ending 12 Mar-18* 12 Mar-19* % Change
Networth Rs m 119,715 131,204 9.6
 
Current Liabilities Rs m 44,814 44,092 -1.6
Long-term Debt Rs m 1,496 1,248 -16.6
 Total Liabilities Rs m 173,967 185,044 6.4
 
Current assets Rs m 90,022 84,132 -6.5
Fixed Assets Rs m 53,164 55,252 3.9
Total Assets Rs m 173,967 185,044 6.4
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Company Reports, Regulatory Filings, Equitymaster

HERO MOTOCORP Cash Flow Statement Analysis

 HERO MOTOCORP's cash flow from operating activities (CFO) during FY19 stood at Rs 10
billion on a YoY basis.
 Cash flow from investing activities (CFI) during FY19 stood at Rs 13 billion on a YoY basis.
 Cash flow from financial activities (CFF) during FY19 stood at Rs -23 billion on a YoY basis.
 Overall, net cash flows for the company during FY19 stood at Rs 775 million from the Rs 566
million net cash flows seen during FY18.

HERO MOTOCORP Cash Flow Statement 2018-19

No. of
12 12
Particulars months % Change
Year Ending Mar-18 Mar-19
Cash Flow from Operating
Rs m 40,172 10,323 -74.3%
Activities
Cash Flow from Investing
Rs m -18,582 12,976 -
Activities
Cash Flow from Financing
Rs m -21,025 -22,524 -
Activities
Net Cash Flow Rs m 566 775 37.0%
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Company Reports, Regulatory Filings, Equitymaster

Current Valuations for HERO MOTOCORP

 The trailing twelve-month earnings per share (EPS) of the company stands at Rs 173.6, an
decline from the EPS of Rs 186.4 recorded last year.
 The price to earnings (P/E) ratio, at the current price of Rs 2,413.0, stands at 14.2 times its
trailing twelve months earnings.
 The price to book value (P/BV) ratio at current price levels stands at 4.9 times, while the price to
sales ratio stands at 1.9 times.
 The company's price to cash flow (P/CF) ratio stood at 12.0 times its end-of-year operating cash
flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending 12 Mar-18* 12 Mar-19*
 Sales per share (Unadj.) Rs 1,625.4 1,700.8
TTM Earnings per share Rs 186.4 173.6
Diluted earnings per share Rs 186.4 173.6
Price to Cash Flow x 11.3 12.0
TTM P/E ratio x 14.2 14.2
Price / Book Value ratio x 6.2 4.9
Market Cap Rs m 481,842 481,844
Dividends per share (Unadj.) Rs 95.0 87.0
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Company Reports, Regulatory Filings, Equitymaster

Ratio Analysis for HERO MOTOCORP

 Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 1.9x during FY19, from 2.0x
during FY18. The current ratio measures the company's ability to pay short-term and long-term obligations.
Interest Coverage Ratio: The company's interest coverage ratio deteriorated and stood at 136.7x
during FY19, from 171.2x during FY18. The interest coverage ratio of a company states how easily a
company can pay its interest expense on outstanding debt. A higher ratio is preferable.
 Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at 26.4% during FY19, from
31.1% during FY19. The ROE measures the ability of a firm to generate profits from its shareholders capital
in the company.
Return on Capital Employed (ROCE): The ROCE for the company declined and down at 38.8%
during FY19, from 43.9% during FY18. The ROCE measures the ability of a firm to generate profits from its
total capital (shareholder capital plus debt capital) employed in the company.
Return on Assets (ROA): The ROA of the company declined and down at 18.9% during FY19, from
21.6% during FY18. The ROA measures how efficiently the company uses its assets to generate earnings.
Key Ratio Analysis
No. of Mths Year Ending 12 Mar-18* 12 Mar-19*
Current ratio x 2.0 1.9
Debtors’ Days Days 16 29
Interest coverage x 171.2 136.7
Debt to equity ratio x 0.0 0.0
Return on assets % 21.6 18.9
Return on equity % 31.1 26.4
Return on capital employed % 43.9 38.8
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Company Reports, Regulatory Filings, Equitymaster
To see how HERO MOTOCORP has performed over the last 5 years, please visit here.
HERO MOTOCORP Share Price Performance

Over the last one year, HERO MOTOCORP share price has moved up from Rs 3,636.7 to Rs 2,413.0,
registering a loss of Rs 1,223.8 or around 33.7%.
Meanwhile, the S&P BSE AUTO Index is trading at Rs 17,292.8 (down 2.3%). Over the last one year it has
moved down from 24,702.0 to 17,292.8, a loss of 7,409 points (down 30.0%).
Overall, the S&P BSE SENSEX is up 9.9% over the year.

HERO MOTOCORP vs BAJAJ AUTO - Comparison

Results
HERO MOTOCORP     Change
Hero Motocorp (HMC; erstwhile Hero Honda Motors) is the largest manufacturer of motorcycles in the
world. The company was earlier a joint venture promoted by Hero Cycles (P) Limited and Honda Motor
Company with each partner holding 26% stake. HMC is solely engaged in manufacturing and sale of
motorcycles and gearless scooters. Its initial technology agreement with Honda expired in 2004, which was
extended till 2014. However, in December 2010, Hero Honda made an announcement with respect to the
new licensing agreement, which eventually led the Hero Group to buy out Honda's 26% stake. Some of the
other features of the agreement included fresh licensing agreement with Honda to provide new models,
freedom to export to new markets and independence to set up own R&D and new product development
capabilities and acquire technology.
BAJAJ AUTO 
   Change
Bajaj Auto enjoys a 25.4% market share (FY12) in the motorcycle segment in India. The company's sales
mix (in terms of units sold) consists of motorcycles (88%) and three-wheelers (12%). Though the company
has traditionally been a key player in the geared scooter segment, aggressive pricing coupled with a slew
of new launches has resulted in increasing market share in the motorcycle segment from 16% in FY00 to
around 25% in FY12. Besides, Bajaj Auto is also dominant in the three-wheeler category with 39.5% of
domestic market share.

HERO MOTOCORP AND BAJAJ AUTO SHARE PRICE COMPARISON

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CURRENT VALUATIONS

HERO
HERO BAJAJ
    MOTOCORP/  
MOTOCORP AUTO
BAJAJ AUTO

P/E (TTM) x 10.1 13.9 72.7%

P/BV x 2.9 3.0 96.6%

Dividend Yield % 4.6 2.5 183.5%  

FINANCIALS

EQUITY SHARE DATA

HERO
BAJAJ HERO
MOTOCOR
    AUTO MOTOCORP/
P
Mar-19 BAJAJ AUTO
Mar-19

High Rs 3,862 3,214 120.2%   

Low Rs 2,517 2,425 103.8%   

Sales per share
Rs 1,700.8 1,045.4 162.7%
(Unadj.)

Earnings per share

Rs 173.6 170.3 101.9%
(Unadj.)

Cash flow per share

Rs 204.8 179.5 114.1%
(Unadj.)

Dividends per share

Rs 87.00 60.00 145.0%
(Unadj.)

Dividend yield (eoy) % 2.7 2.1 128.2%

Book value per share

Rs 656.9 802.9 81.8%
(Unadj.)

Shares outstanding
m 199.73 289.37 69.0%   
(eoy)

Bonus/Rights/Convers
- - -   
ions

Price / Sales ratio x 1.9 2.7 69.5%   

Avg P/E ratio x 18.4 16.6 111.0%

P/CF ratio (eoy) x 15.6 15.7 99.1%

Price / Book Value

x 4.9 3.5 138.3%
ratio

Dividend payout % 50.1 35.2 142.3%   

Rs
Avg Mkt Cap 637,059 815,879 78.1%   
m

`00
No. of employees 8.6 10.3 83.4%   
0

Rs
Total wages/salary 17,780 12,569 141.5%   
m

Rs
Avg. sales/employee 39,727.3 29,489.1 134.7%   
Th

Rs
Avg. wages/employee 2,079.3 1,225.3 169.7%   
Th

Avg. net Rs
4,053.7 4,803.7 84.4%   
profit/employee Th
 INCOME DATA

Rs
Net Sales 339,708 302,500 112.3%
m

Rs
Other income 6,867 15,550 44.2%   
m

Rs
Total revenues 346,576 318,050 109.0%   
m

Rs
Gross profit 50,184 53,287 94.2%
m

Rs
Depreciation 6,244 2,657 235.0%   
m

Rs
Interest 372 45 829.9%   
m

Rs
Profit before tax 50,435 66,136 76.3%   
m

Rs
Minority Interest 608 0 -   
m

Rs
Prior Period Items 0 0 -   
m

Extraordinary Inc Rs
0 3,420 0.0%   
(Exp) m

Rs
Tax 16,380 20,280 80.8%   
m

Rs
Profit after tax 34,664 49,276 70.3%
m

Gross profit margin % 14.8 17.6 83.9%

Effective tax rate % 32.5 30.7 105.9%   

Net profit margin % 10.2 16.3 62.6%

BALANCE SHEET DATA

Rs
Current assets 84,132 70,732 118.9%   
m

Rs
Current liabilities 44,092 48,738 90.5%   
m
 BALANCE SHEET DATA

Net working cap to

% 11.8 7.3 162.1%
sales

Current ratio x 1.9 1.5 131.5%

Day
Inventory Days 13 12 115.7%
s

Day
Debtors Days 29 31 95.5%
s

Rs
Net fixed assets 55,252 18,120 304.9%   
m

Rs
Share capital 400 2,894 13.8%   
m

Rs
"Free" reserves 130,805 229,444 57.0%   
m

Rs
Net worth 131,204 232,338 56.5%   
m

Rs
Long term debt 1,248 0 -   
m

Rs
Total assets 185,044 288,344 64.2%
m

Interest coverage x 136.7 1,477.2 9.3%   

Debt to equity ratio x 0 0 -

Sales to assets ratio x 1.8 1.0 175.0%   

Return on assets % 18.9 17.1 110.7%

Return on equity % 26.4 21.2 124.6%

Return on capital % 38.8 30.0 129.6%

Exports to sales % 0 0 -   

Imports to sales % 0 0 -   

Rs
Exports (fob) NA NA -   
m

Imports (cif) Rs NA NA -   
 BALANCE SHEET DATA

Rs
Fx inflow 8,320 114,342 7.3%   
m

Rs
Fx outflow 18,489 9,731 190.0%   
m

Rs
Net fx -10,168 104,612 -9.7%   
m

CASH FLOW

Rs
From Operations 10,323 24,869 41.5%
m

Rs
From Investments 12,976 -3,384 -383.4%
m

From Financial Rs
-22,524 -20,741 108.6%
Activity m

Rs
Net Cashflow 775 1,400 55.3%
m

SHARE HOLDING

Indian Promoters % 52.2 49.2 106.1%  

Foreign collaborators % 0.0 0.0 -  

Indian inst/Mut Fund % 8.5 10.6 80.0%  

FIIs % 30.6 15.0 204.0%  

ADR/GDR % 0.0 0.0 -  

Free float % 8.8 25.1 35.1%  

Shareholders   75,661 78,518 96.4%  

Pledged promoter(s)
% 0.0 0.1 -  
holding