MARKET EYE-BoFA downgrades Hero MotoCorp; cuts target to 1,650 rupees

Tue Dec 4, 2012 10:08am IST

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* Bank of America Merrill Lynch downgrades Hero MotoCorp
 to "underperform" from "buy" and cuts its target price
to 1,650 rupees from 1,980 rupees.
* The bank expects the company's domestic sales to remain muted
and in 'single digits.' This is primarily due to heavy
dependence on 100cc bikes where better options are available
with competitors, and likely structural shift to 150cc plus
premium bikes where the "company's franchise is weak".
* "We cut our export assumptions by 40 percent/year to factor in
the six-month delay in its overseas foray," BofA said in a note.
* It expects Hero MotoCorp's margin expansion to be muted, cuts
EBITDA margin assumptions by 70bp/year to 11.4/13.1 percent to
factor peer pressures, and rupee weakness that will hurt
imports.
* At 0436 GMT, shares were down 0.72 percent at 1,808.05 rupees.

 (manoj.dharra@thomsonreuters.com)
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