Brokerages trimmed target prices on Hero MotoCorp by as much as 8 per cent after the company reported a 24.5 per cent decline in profit for the March quarter at Rs 730 crore.Shares of Hero MotoCorp ended down 0.5 per cent ahead of result announcement on Friday.CLSA cut the target price by 1 per cent to Rs 2,375 mkay Global cut target price by 4 per cent, IDBI Capital lowered it by 8 per cent and Equirus by 7.5 per cent.We expect Heros overall twowheeler market share to decline by 60 bps over the next two years.
Given the multiple headwinds in the sector, we expect profitability to remain under pressure expect EBITDA margin of 14 per cent/ 13.3 per cent in FY20/21, said Kotak Institutional Equities which has a sell recommendation on Hero MotoCorp.Analysts expect margin headwinds for two-wheeler companies going forward as they believe original equipment manufacturers will find it difficult to pass on the full cost impact of new safety and emission norms due to weak demand and high competition.CLSA said valuations are not cheap despite a 30 per cent fall in the stock over the last one year.The success of Heros new 125 cc scooters and premium bikes would be crucial to lift its longterm growth outlook, the foreign brokerage said.