2QFY2012 Result Update | Automobile

October 18, 2011

Hero MotoCorp
Performance Highlights
Y/E March (` cr) Net sales Adj. EBITDA Adj. EBITDA margin (%) Reported PAT
Source: Company, Angel Research

NEUTRAL
CMP Target Price
2QFY11 4,552 608 13.4 506 % chg (yoy) 28.1 17.1 (115)bp 19.4 Angel est. 5,799 651 11.2 557 % diff 0.5 9.4 99bp 8.4

`1,985 -

2QFY12 5,829 712 12.2 604

Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

Automobile 39,637 0.4 2,232/1,378 83,313 2 16,748 5,038 HROH.BO

Hero MotoCorps (HMCL) 2QFY2012 results surprised positively on the bottom-line front on account of better-than-expected operating margin. Strong top-line growth of 28.1% yoy (2.6% qoq) was on expected lines, driven by 20.1% (1% qoq) and 6.8% yoy (1.6% qoq) growth in total volumes and net average realization, respectively. We maintain our volume estimates at 6.1mn/6.8mn for FY2012E/FY2013E; however, our earnings estimates are marginally revised as we expect slight improvement in operating margins going ahead. We maintain our Neutral view on the stock. Above-expectation operating performance: HMCL reported in-line net sales growth of 28.1% yoy to `5,829cr, aided by strong 20.2% and 15% yoy growth in domestic and exports volumes, respectively. Scooter volumes sustained their robust performance, posting 32% yoy growth; and motorcycle sales grew by 19.3% yoy. Adjusted EBITDA margin (adjusted for royalty payments) stood at 12.2% (up 93bp qoq), above our estimates, led by improved product mix, price increases and lower raw-material expenses. Other expenses, however, increased by 70bp qoq due to rebranding-related costs. Led by better-than-expected operating performance and lower tax rate, net profit registered strong growth of 19.4% yoy (8.2% qoq) to `604cr. Royalty outgo was higher during 2QFY2012 as Yen exposure was unhedged and Yen appreciated against the INR. Outlook and valuation: While we maintain our volume estimates for HMCL, we expect volume growth to taper off in 2HFY2012 on account of high base effect. We believe the benefits of lower raw-material cost will be limited as the company intends to incur higher advertising, rebranding and R&D expenses. Further, due to increased competitive activity in the two-wheeler segment, HMCLs market share will remain under pressure, leaving limited room for earnings upgrade. At `1,985, HMCL is trading at 15.3x FY2013E earnings, in-line with its historical multiple of 15x. We maintain our Neutral view on the stock.

HH@IN

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 52.2 5.8 34.9 7.1

Abs. (%) Sensex Hero Honda

3m 9.2

1yr

3yr 67.9

(9.5) (17.0)

9.8 144.6

Key financials
Y/E March (` cr) Net sales % chg Adj. profit % chg Adj. OPM (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2010 15,758 27.9 2,082 76.3 16.9 104.2 19.0 11.4 57.3 64.1 2.0 12.7 FY2011 19,245 22.1 1,842 (11.5) 12.4 92.2 21.5 13.4 57.4 47.2 1.7 15.1 FY2012E 22,863 18.8 2,327 26.3 14.5* 116.5 17.0 9.1 63.7 44.1 1.4 10.2 FY2013E 26,260 14.9 2,598 11.7 14.1* 130.1 15.3 6.6 50.2 38.6 1.1 8.4

Yaresh Kothari
022-39357800 Ext: 6844 yareshb.kothari@angelbroking.com

Source: Company, Angel Research; Note: * OPM adjusted for change in treatment of royalty costs

Please refer to important disclosures at the end of this report

Hero MotoCorp | 2QFY2012 Result Update

Exhibit 1: Quarterly performance

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation Other Income PBT (excl. Extr. Items) Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) Reported PAT PATM Equity capital (cr) EPS (`)
Source: Company, Angel Research

2QFY12 5,829 4,224 72.5 179 3.1 508 8.7 4,911 919 15.8 (4.5) 278 80 724 724 12.4 121 16.7 604 10.4 40 30.2

2QFY11 4,552 3,310 72.7 150 3.3 484 10.6 3,944 608 13.4 (2.1) 61 78 628 628 13.8 122 19.4 506 11.1 40 25.3

yoy chg (%) 28.1 27.6 19.7 4.8 24.5 51.1 116.9 358.4 1.8 15.4 15.4 (1.0) 19.4

1QFY12 5,683 4,245 74.7 165 2.9 456 8.0 4,866 818 14.4 (3.2) 240 88 670 670 11.8 112 16.7 558 9.8 40

qoq chg (%) 2.6 (0.5) 9.0 11.2 0.9 12.3 40.8 16.1 (9.8) 8.2 8.2 8.2 8.2

1HFY12 11,513 8,468 73.6 344 3.0 964 8.4 9,776 1,736 15.1 (7.7) 518 168 1,394 1,394 12.1 233 16.7 1,162 10.1 40

1HFY11 8,849 6,369 72.0 295 3.3 974 11.0 7,638 1,210 13.7 (4.7) 109 132 1,238 1,238 14.0 241 19.4 997 11.3 40 49.9

% chg 30.1 33.0 16.6 (1.0) 28.0 43.5 62.4 375.4 27.6 12.6 12.6 (3.4) 16.5

19.4

27.9

8.2

58.2

16.5

Exhibit 2: Quarterly volume performance

Volume (units) Total two-wheelers Domestic Exports Motorcycles Domestic Exports Scooters Domestic Exports
Source: Company, Angel Research

2QFY12 1,544,315 1,504,470 39,845 1,436,759 1,407,172 29,587 107,556 97,298 10,258

2QFY11 1,285,944 1,251,286 34,658 1,204,472 1,173,454 31,018 81,472 77,832 3,640

yoy chg (%) 20.1 20.2 15.0 19.3 19.9 (4.6) 32.0 25.0 181.8

1QFY12 1,529,577 1,491,162 38,415 1,423,793 1,393,370 30,423 105,784 97,792 7,992

qoq chg (%) 1.0 0.9 3.7 0.9 1.0 (2.7) 1.7 (0.5) 28.4

1HFY12 3,073,892 2,995,632 78,260 2,860,552 2,800,542 60,010 213,340 195,090 18,250

1HFY11 2,519,983 2,455,063 64,920 2,362,838 2,305,198 57,640 157,145 149,865 7,280

% chg 22.0 22.0 20.5 21.1 21.5 4.1 35.8 30.2 150.7

October 18, 2011

Hero MotoCorp | 2QFY2012 Result Update

Strong top-line growth on robust volume performance: HMCL posted in-line 28.1% yoy (2.6% qoq) growth in its top line to `5,829cr, led by volume growth of 20.1% yoy (1% qoq) and a 6.8% yoy (1.6% qoq) increase in average net realization. HMCL recorded its highest-ever volume performance in 2QFY2012 on the back of a 19.3% and 32% yoy increase in motorcycle and scooter sales, respectively. Net average realization improved to `37,456/vehicle, driven by price increases and improved product mix.

Exhibit 3: Volume growth remains strong at 20.1% yoy

(units) 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Total volume
29.6 21.7

Exhibit 4: Net average realization improves 6.8% yoy

(`) 38,000 37,000 36,000 35,000 34,000 33,000 32,000
4.1 2.4 1.5 0.9 2.7 4.4 6.7

yoy growth (RHS)

28.5 22.6 23.9 20.1 10.3

(%) 35 30 25 20 15 10 5 0

Net average realisation/unit

yoy growth (RHS)

6.7 6.8

(%) 8 7 6 5 4 3 2 1 0

18.9

8.7

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

Source: Company, Angel Research

2QFY12

Source: Company, Angel Research

Operating margin expands on lower raw-material costs: HMCLs adjusted EBITDA margin (adjusted for royalty payments) came in above our expectations at 12.2%, reporting an expansion of 93bp qoq, primarily due to lower raw-material expenses, price increases and improved operating leverage. Other operating expenses, however, increased by ~70bp qoq, probably on account of higher advertising and marketing spend. On a yoy basis though, operating margin declined by 115bp mainly due to higher other expenses. Adjusted operating profit grew by 17.1% yoy (11.1% qoq) to `712cr, 9.4% above our estimates of `651cr.

Exhibit 5: EBITDA margin improves qoq

(%) 80 70 60 50 40 30 20 10 0
18.3 17.3 17.3 14.0 13.4 11.2 12.1 11.3 12.2 68.4 68.5 67.6 71.7 73.4 74.5 73.4 75.3 73.0

Exhibit 6: Net profit jumps 8.2% qoq

(` cr) 700 600 500 400 300 200 100 0
14.7

2QFY12
(%) 16 14 12 10 8 6 4 2 0
10.4

EBITDA margin

Raw material cost/sales

Net profit (LHS)

14.0 14.5 11.4 11.1

Net profit margin (RHS)

8.3

9.3

9.8

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

Source: Company, Angel Research

2QFY12

Source: Company, Angel Research

October 18, 2011

2QFY12

Hero MotoCorp | 2QFY2012 Result Update

Net profit jumps 8.2% qoq: Led by better-than-expected operating performance and lower tax rate, net profit registered strong growth of 19.4% yoy (8.2% qoq) to `604cr. Net profit growth during the quarter was restricted on account of unhedged Yen exposure. Royalty payment to Honda Motor Co. in INR terms increased in 2QFY2012 to `207cr compared to `177cr in 1QFY2012 as Yen appreciated compared to the INR during the quarter.

Exhibit 7: Market share trend

(%) 70 60 50 40 30 20 10 0
15.1 12.8 14.6 15.3 49.7 47.0 44.8 44.1 43.4 15.8 45.2 16.3 46.0 18.4 46.8 18.4 44.2 15.0 60.4

Scooter
57.3 54.8

Motor-cycle
53.9 53.0 55.5

Total 2-wheeler
55.9 56.5 55.0

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

Source: Company, SIAM, Angel Research

Conference call Key highlights

According to management, the two-wheeler industry continues to witness strong growth and, therefore, management reiterated its ~15% volume growth guidance. Share of rural sales has increased from ~38% to ~45% over the last few years and demand in rural markets continues to remain strong. Existing capacity of the company stands at 6.15mn units and is expected to expand to 6.5mn units by the end of FY2012E through de-bottlenecking exercise. Production at Haridwar is expected to increase to 9,500 units/day in three months from the current rate of 8,000 units/day. HMCL intends to increase its scooter capacity to ~50,000 units/month. Management indicated that aluminum, steel and nickel prices have more or less stabilized and, thus, expects operating margins to improve in 2HFY2012. Management expects capital expenditure of ~`600cr for FY2012 against `800cr-900cr planned earlier. The guidance has been lowered mainly because of delay in finalizing the new plant location. The company expects the INR to appreciate against Yen from here on and, hence, Yen exposure remains unhedged.

October 18, 2011

2QFY12

Hero MotoCorp | 2QFY2012 Result Update

Investment arguments
Expect the demand scenario to remain healthy: In view of normal monsoons and increasing penetration in rural markets (currently ~10%), we believe demand momentum will remain healthy over FY2011-13E. As such, we expect the two-wheeler industry to register a 13-15% CAGR in volumes over FY2011-13E. We expect HMCL to slightly underperform the industrys growth during the period. Capacity expansion to meet increasing demand: HMCL commenced expansion plans at its Haridwar plant in Uttarakhand, with the first plant commissioned in April 2008 with an initial capacity of 500,000 units. The company has increased its total installed capacity to 6.15mn units in FY2011 from 5.4mn units in FY2010, with capacity of 2.25mn at Haridwar and 1.95mn each at Dharuhera and Gurgaon. HMCL plans to further expand its capacity to 6.4mn-6.5mn units by FY2012 through de-bottlenecking at existing plants. As a result of capacity expansion, HMCL will be able to meet the increasing demand and, as such, is expected to post a volume CAGR of 12.5% over FY2011-13E. The Haridwar plant also avails tax benefits, including a 100% excise exemption for 10 years and a 100% income tax exemption for the first five years and 30% for the next five years. Besides the Haridwar plant, two plants in Gurgaon also enjoy tax benefits.

Outlook and valuation

While we maintain our volume estimates at 6.1mn/6.8mn for FY2012E/FY2013E, we expect volume growth to taper off in 2HFY2012 on account of high base effect. We expect HMCL to record a healthy CAGR of 16.8% in revenue over FY201113E, aided by a 12.5% CAGR in volumes. We believe the benefits of lower raw-material cost will be limited as the company intends to incur higher advertising, rebranding and R&D expenses. Due to increased competitive activity in the two-wheeler segment, HMCLs domestic market share in the motorcycle segment dropped to ~56% in FY2011 from ~63% in FY2009. Going ahead, due to intense competition, we believe the companys market share will continue to remain under pressure. Further, uncertainty regarding access to technology and product development capability post the split with Honda Motor Co. leaves limited room for an earnings upgrade. At `1,985, HMCL is trading at 15.3x FY2013E earnings, in-line with its historical multiple of 15x. Thus, we maintain our Neutral view on the stock.

October 18, 2011

Hero MotoCorp | 2QFY2012 Result Update

Exhibit 8: Change in estimates

Y/E March Net sales (`cr) OPM (%) EPS (`) Earlier estimates FY2012E 22,996 13.7 108.4 FY2013E 26,326 14.0 126.0 Revised estimates FY2012E 22,863 14.5 116.5 FY2013E 26,260 14.1 130.1 % chg FY2012E (0.6) 80bps 7.5 FY2013E (0.3) 19bps 3.2

Source: Company, Angel Research

Exhibit 9: Key assumptions

Y/E March (units) Domestic < 125cc > 125cc Exports < 125cc > 125cc Motorcycle Domestic Exports Scooters Total volume Growth (yoy, %) Domestic < 125cc > 125cc Exports < 125cc > 125cc Motorcycle Domestic Exports Scooters Total volume
Source: Company, Angel Research

FY08 3,144,101 2,966,329 177,712 88,219 80,620 7,599 3,232,320 102,470 2,352 104,822 3,337,142 (0.1) (2.5) 67.5 (8.7) (14.0) 160.2 (0.4) 11.5 127.9 12.8 0.0

FY09 3,487,614 3,302,095 185,519 78,176 69,644 8,532 3,565,790 153,193 3,017 156,210 3,722,000 10.9 11.3 4.4 (11.4) (13.6) 12.3 10.3 49.5 28.3 49.0 11.5

FY10 4,293,991 4,055,304 238,687 91,867 82,824 9,043 4,385,858 208,440 5,832 214,272 4,600,130 23.1 22.8 28.7 17.5 18.9 6.0 23.0 36.1 93.3 37.2 23.6

FY11 4,926,390 4,589,003 337,387 114,581 102,524 12,057 5,040,971 342,991 18,482 361,473 5,402,444 14.7 13.2 41.4 24.7 23.8 33.3 14.9 64.6 216.9 68.7 17.4

FY12E 5,527,678 5,139,683 387,995 118,923 106,625 12,298 5,646,602 428,739 33,268 462,006 6,108,608 12.2 12.0 15.0 3.8 4.0 2.0 12.0 25.0 80.0 27.8 13.1

FY13E 6,165,301 5,730,747 434,554 136,393 122,619 13,774 6,301,694 493,050 46,575 539,624 6,841,318 11.5 11.5 12.0 14.7 15.0 12.0 11.6 15.0 40.0 16.8 12.0

Exhibit 10: Angel vs. consensus forecast

Angel estimates FY12E Net sales (`cr) EPS (`) 22,863 116.5 FY13E 26,260 130.1 Consensus FY12E 22,760 113.7 FY13E 25,911 132.3 Variation (%) FY12E 0.5 2.5 FY13E 1.3 (1.6)

Source: Bloomberg, Angel Research

October 18, 2011

Hero MotoCorp | 2QFY2012 Result Update

Exhibit 11: One-year forward P/E band

(`) 3,000 2,500 2,000 1,500 1,000 500 0 Share price (`) 8x 12x 16x 20x

Exhibit 12: One-year forward P/E chart

(x) 25 20 15 10 5 0 Absolute P/E Five-yr average P/E

Aug-04

Mar-06

Aug-08

Nov-03

Mar-10

Dec-10 May-11

Jan-03

Jun-05

Apr-02

Jan-07

Oct-07

May-06

Nov-07

Mar-10

Dec-10

Source: Company, Bloomberg, Angel Research

Source: Company, Bloomberg, Angel Research

Exhibit 13: Premium/Discount to Sensex P/E

(%) 80 60 40 20 0 (20) (40) (60) (80) Absolute premium Five-yr average P/E

Exhibit 14: Two-wheeler stock performance v/s Sensex

500 450 400 350 300 250 200 150 100 50 0 TVS HH BAL Sensex

May-09

May-10

Dec-09

Sep-10

Jul-08

May-09

Feb-07

Sep-08

Apr-03

Jan-04

Jun-09

Oct-04

Oct-11

Mar-08

Dec-10

Aug-09

Jun-05

Apr-09

Jan-11

Jan-03

Jan-07

Aug-04

Mar-06

Aug-08

Nov-03

Mar-10

Source: Company, Bloomberg, Angel Research

Source: Company, Bloomberg, Angel Research

Exhibit 15: Automobile - Recommendation summary

Company Ashok Leyland Bajaj Auto Hero MotoCorp Maruti Suzuki M&M Tata Motors TVS Motor Reco. Buy Accumulate Neutral Accumulate Accumulate Neutral Accumulate CMP Tgt. price (`) (`) 24 1,609 1,985 1,053 806 181 62 31 1,699 1,172 848 65 Upside (%) 29.6 5.6 11.3 5.3 5.1 P/E (x) FY12E 12.2 15.2 17.0 14.0 17.2 6.5 12.8 FY13E 9.3 14.2 15.3 11.7 15.1 5.9 11.4 EV/EBITDA (x) FY12E 6.7 10.3 10.2 8.2 11.2 4.5 6.3 FY13E 5.6 8.9 8.4 6.3 9.2 4.3 5.4 RoE (%) FY12E 12.8 54.6 63.7 14.3 25.0 44.6 19.2 FY13E 15.5 45.9 50.2 14.8 24.3 42.8 20.3 FY11-13E EPS CAGR (%) 4.6 9.2 18.8 7.5 11.1 3.7 11.8

Source: Company, Bloomberg, Angel Research

October 18, 2011

Nov-08

Apr-02

Oct-07

Oct-11

Oct-11

Oct-11

Jul-05

Hero MotoCorp | 2QFY2012 Result Update

Profit & Loss Statement

Y/E March (` cr) Gross sales Less: Excise duty Net Sales Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation & Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT Tax (% of PBT) PAT (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Adjusted EPS (`) % chg FY08 1,703 FY09 1,224 FY10 1,022 FY11 1,417 FY12E 1,668 FY13E 1,901 12,039 13,543 16,781 20,662 24,531 28,161 10,335 12,319 15,758 19,245 22,863 26,260 10,335 12,319 15,758 19,245 22,863 26,260 4.5 7,406 152 321 1,126 1,330 15.3 12.9 160 1,170 15.4 11.3 2 243 16.2 1,410 13.2 89 1,499 442 29.5 968 879 13.1 8.5 48.5 44.0 13.1 19.2 27.9 22.1 18.8 14.9 9,005 10,635 13,096 16,865 19,548 22,547 8,742 10,736 14,111 16,919 19,432 187 371 1,335 1,684 26.7 13.7 181 1,504 28.6 12.2 3 280 14.9 1,781 26.3 101 1,883 500 26.5 1,282 1,181 34.3 9.6 64.2 59.1 34.3 225 438 1,697 2,662 58.0 16.9 191 2,471 64.3 15.7 2 363 12.2 2,832 59.0 150 2,982 600 20.1 2,232 2,082 76.3 13.2 111.8 104.2 76.3 265 515 1,973 2,380 (10.6) 12.4 402 1,978 (19.9) 10.3 16 443 17.8 2,405 (15.1) 86 2,491 477 19.1 1,928 1,842 (11.5) 9.6 96.5 92.2 (11.5) 297 709 1,623 3,315 39.3 14.5* 941 2,375 20.0 10.4 19 465 16.5 2,820 17.3 2,820 494 17.5 2,327 2,327 26.3 10.2 116.5 116.5 26.3 341 856 1,917 3,713 12.0 14.1* 1,039 2,674 12.6 10.2 22 497 15.8 3,149 11.7 3,149 551 17.5 2,598 2,598 11.7 9.9 130.1 130.1 11.7

Note: * OPM according to the new accounting policy for royalty payments

October 18, 2011

Hero MotoCorp | 2QFY2012 Result Update

Balance Sheet
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves & Surplus Shareholders Funds Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 1,756 783 974 408 182 2,567 937 131 191 615 1,825 3,244 2,310 943 1,367 121 207 3,369 1,013 220 317 477 2,053 4,024 2,519 1,092 1,427 48 232 3,926 2,883 1,907 431 545 4,831 3,684 5,308 1,458 3,850 125 231 5,129 1,505 72 778 656 6,145 4,694 5,939 2,399 3,540 119 231 6,695 2,346 749 800 797 6,844 6,086 6,839 3,438 3,400 137 231 8,912 2,813 977 919 918 7,744 7,750 40 2,946 2,986 132 125 3,244 40 3,761 3,801 78 144 4,024 40 3,425 3,465 66 153 3,684 40 2,916 2,956 1,491 247 4,694 40 4,308 4,348 1,491 247 6,086 40 5,972 6,012 1,491 247 7,750 FY08 FY09 FY10 FY11 FY12E FY13E

(888) (1,039) (1,949) (4,640) (4,498) (4,930)

Cash Flow Statement

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec. in Fixed Assets (Inc.)/Dec. in Investments (Inc.)/Dec. in loans and advances Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY08 160 (339) (381) 442 (325) (593) 79 243 (597) 33 444 (1,044) (567) 95 36 131 FY09 181 FY10 2,982 191 FY11 2,405 402 FY12E 2,820 941 (557) 494 3,719 (624) (22) 465 935 FY13E 3,149 1,039 (779) 551 4,253 (918) (102) 497 935 1,499 1,883

(364) (2,674) (1,235) 500 (265) (802) (103) 255 (916) 54 467 600 4,787 477 4,643

(183) (4,888) (3,548) (1,009) (1,395)

1,259 1,382

(137) (2,901) (94) 363 12 2,568 (393) 424 33 2,453

(557) (1,203) (1,566) (2,217)

(424) (4,073) (1,748) (2,740)

(899) (5,255) (4,893) (2,228) (2,220) (378) (2,675) (2,406) (1,294) (1,285) 88 131 220 1,688 (1,836) 220 1,907 1,907 72 677 72 749 228 749 977

October 18, 2011

Hero MotoCorp | 2QFY2012 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover Inventory / Sales (days) Receivables (days) Payables (days) WC (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (0.9) (1.9) 584.8 (0.9) (2.1) 594.3 (1.7) (2.2) 1,176 (1.3) (1.6) 125.2 (1.4) (1.8) 126.5 (1.4) (2.3) 124.0 6.1 10 11 42 (29) 6.1 10 7 42 (34) 6.5 9 3 62 (59) 4.9 9 2 84 (81) 4.1 9 2 87 (79) 4.1 10 2 88 (78) 38.9 25.8 32.2 41.4 28.4 34.8 64.1 109.6 57.3 47.2 34.3 57.4 44.1 36.7 63.7 38.6 32.6 50.2 11.3 0.7 3.5 28.2 0.0 0.0 28.2 12.2 0.7 3.6 31.9 0.0 0.0 31.9 15.7 0.8 5.6 70.7 0.0 0.0 70.7 10.3 0.8 6.0 50.0 0.0 0.0 50.0 10.4 0.8 4.6 39.3 0.0 0.0 39.3 10.2 0.8 4.3 36.4 0.0 0.0 36.4 48.5 44.0 56.5 19.0 149.5 64.2 59.1 73.2 20.0 190.3 111.8 104.2 113.8 110.0 173.5 96.5 92.2 112.4 105.0 148.0 116.5 116.5 163.6 40.0 217.7 130.1 130.1 182.2 40.0 301.0 45.1 35.1 13.3 1.0 3.1 27.9 11.4 33.6 27.1 10.4 1.0 2.7 21.4 9.0 19.0 17.4 11.4 5.5 2.0 12.7 9.2 21.5 17.7 13.4 5.3 1.7 15.1 7.7 17.0 12.1 9.1 2.0 1.4 10.2 5.5 15.3 10.9 6.6 2.0 1.1 8.4 4.0 FY08 FY09 FY10 FY11E FY12E FY13E

October 18, 2011

10

Hero MotoCorp | 2QFY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Hero MotoCorp No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

October 18, 2011

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