Technically, HM (CMP: 2524) has very good strong support near 2480-2440 zone below 2500. Holding this support, it could rebound to 2600-2670 area immediately & sustaining above that, 2710-2745 area should be the target in short term. Consecutive closing above 2745, HM could again target 2860-2980 in the medium term. In the long term, sustaining above 3000 zone, it could even scale to 3300-3600 territory.
On the flip side, consecutive closing below 2440, HM could be crashed to 2360-2186-2128 zone in the short to mid term. Sustaining below 2100 zone, it could fall to 1600 zone (very low probability in the current market conditions).
After peaking around 3268 in last Dec, HM corrected to a great extent around 2509 till yesterday (approx 25%). It was sold heavily for the last few months on the back of news that, promoters sold some stakes around two months ago (possibly for diversification into defence field ??). Monthly sales figure was also worst. But, going by the speed of correction, it may be assumed that majority of the bad news are already discounted in the market. Next cues may come from its QTR result, which will be out in this month.
It has got some good news in the form of its green field manufacturing project approval in AP after some land acquisition hurdle. Its newly launched fuel efficient i-Smart bike may also cheer it up going ahead. It appears that on the back of falling crude/petrol price, consumer attention shifted to four wheelers from two wheelers in the last few months. But, crude/petrol price might not last long at present level & Crude is heading towards 60-65 zone in the near term. So, in small cities and rural areas & also in congested metros, two wheeler might be the economical & preferred quick mode of traveling for our young populations. Don't forget that HM is the world's single largest two wheeler motorcycle company, it could be re-rated again, considering vast young demographics of "Shinning India".
As par quick BG model of TF metrics, median valuation of HM is around 2670 as par its current TTM EPS of around 123. But, if we assume projected FWD EPS of around 193 (FY:17-18), its median value may be around 3350.
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | LONG TERM | SHORT TERM | MEDIAN VALUE | 200-DEMA | 10-DEMA |
| HEROMOTOCO | 123.37 | 280.43 | 21.71 | 2693.52 | 2641.80 | 2667.66 | 2708.77 | 2605.74 |
| HEROMOTOCO | 193 | 352 | 21.71 | 3368.95 | 3304.26 | 3336.60 | 2708.77 | 2605.74 |
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