HERO MOTORS (Neutral, TP Rs2800): Mgt expecting festive season to drive sales, and are expecting to close FY16 with a flat-positive number (YTD 7% decline in volumes); To be launching 2 scooters and a premium bike soon. Inventory has been corrected substantially and is now in line with competition. Co. has appointed head of Investor Relations for the first time.We currently have a NEUTRAL with TP of Rs2800.
EICHER (Not Rated): Waiting period for Royal Enfield still remains between 4-6months, depending on models, despite capacity having doubled from 30,000 units p.m to 60,000 units p.m. currently. Company is aggressively expanding its distribution network, since currently the top 20 cities contribute to as high as 60% of volumes, going forward, it would be venturing deeper into the hinterland. Besides, a series of products are in the pipeline, e.g Himalaya- Sport cum Touring bike. Co. is also betting big on the growing export opportunity, where sales are mainly in the lesser than 200CC & more than 750CC segment. Margins are more or less peaked out and see some pressure owing to new capacity, product development and as the company enters new export markets.
Balkrishna Industries (Not Rated): Our meeting with BKT highlights a major breakthrough, Caterpillar (CAT US) the company has recently approved BKT as a preferred vendor. We note that the company has been trying to make inroads in the mining segment and this approval is a major positive for the company.