Hero Honda advanced further on Thursday on good buying support from institutions.
By 12:50 IST, the scrip of the motorcycle major was up by 2.06% to Rs 255 on the BSE. A higher volume of over 1.02 lakh shares was recorded on the counter. In four sessions, the Hero Honda scrip rose by 8.05% to the current level from Rs 236 on 24 January 2003. Earlier, in 25 sessions between 19 December 2002 and 24 January 2003, the scrip shed 16.8% from Rs 283.60.
Dealers said that institutions are accumulating the stock on hopes that the company may declare a huge dividend for the current fiscal 2002-03 (around Rs 17-19 per equity share).
As per market buzz, Life Insurance Corporation was an active buyer on the Hero Honda counter.
Analysts said that institutions upbeat about the scrip on high dividend hopes. However, there were concerns that it will be difficult for the company to maintain its growth rate in the near future. Analysts said that due to tough competition from other players like Bajaj Auto and TVS Motor, the company may not achieve its stipulated sales target of 18 lakh motorcycles for FY 2002-03.
Hero Honda will have to sell 173,000 vehicles per month for three months to meet its FY 2002-03 sales target. In the last nine months (April-December 2002), the company registered sales of 1.28 million motorcycles.
Hero Honda recorded a marginal 2.14% rise in motorcycle sales to 125,000 units in December 2002, which was far below market expectations. The company sold 122,000 bikes in the domestic market, while exports surged to 2,268 motorcycles. On a month-on-month basis, the situation was much worse as the company registered a huge 22.3% fall in vehicle sales, from 161,000 motorcycles in November 2002.
Meanwhile, the rise in the Hero Honda scrip is also attributed to its inclusion in the derivatives segment of the bourses. The inclusion in the derivatives list is expected to generate more interest in the stock.
On 10 January 2003, Hero Honda unveiled its third quarter (ended 31 December 2002) results. It registered a 14.7% rise in its net profit to Rs 152.8 crore (Rs 1.52 billion), compared to Rs 133.22 crore (Rs 1.33 billion) in the corresponding period of the previous year. Net sales also increased by 12.8% to Rs 1,376.04 crore (Rs 13.76 billion) from Rs 1,219.47 crore (Rs 12.19 billion).
Both net profit and sales were in line with market expectations. A capitalmarket.com poll of nine automobile analysts had projected the company's net profit growth in the range of 13.2% to 21.3% to somewhere between Rs 150.77 crore (Rs 1.5 billion) and Rs 161.6 crore (Rs 1.61 billion). Sales were estimated between Rs 1,340.3 crore (Rs 13.4 billion) to Rs 1,392.8 crore (Rs 13.9 billion), up 9.9-14.2%.
FIIs have a substantial holding of 23.23% in Hero Honda, while domestic funds have 5.68%, the Indian public 17.32% and private corporate bodies and NRIs/OCBs 1.76%. The promoters - the Munjal group and Honda Motor Company of Japan hold a 26% stake each in the company.
BSE Code: 500182