P&L Assumption BS Assumptions P&L Output BS FCFF Wacc DCF Value
P&L Assumption BS Assumptions P&L Output BS FCFF Wacc DCF Value
P&L Assumption BS Assumptions P&L Output BS FCFF Wacc DCF Value
1 P&L Assumption
2 BS Assumptions
3 P&L Output
4 BS
5 FCFF
6 WACC
7 DCF Value
Prepared by S
Current Market Price
Intrinsic Value
Hero Moto Corp earlier also known as “Hero Honda” is one of India’s first motorcycle manufacturers.
The company started in 1984 as a Technological collaboration with Honda, Japan. Before this
collaboration, Hero was selling Cycles under the brand name, Hero Cycles. In 2011, Honda group sold
26% stake in the company to the Munjals (promoters) and ended the JV. Post the termination of JV, th
name of the company was changed to Hero Motocorp.
At Present , Hero Motocorp limited is the world's largest manufacture of two wheeler , in terms of un
volumes for 19 years in a row . The company has four manufacturing facilities namely Dharuhera ,
Gurgaon , Haridwar , Neemarana and Chittor plant (under Progress) . Company has the very strong
distribution network comprising of 199 dealers and 25500 retailers . It deals in all the 3 segments i.e
Entry Segment(100cc - 125cc) , Deluxe Segment (125cc - 150cc) and Premium Segment (150cc and
more )
The overall market share of the company in the two-wheeler segment stands at 35.7% as of FY20
Hero Motocorp is a low leveraged company with a debt-equity ratio of 0.011 times on the back of a
total borrowing of Rs.1,499.6 million.
The Company has been focusing on expanding its business to EV segment for which it has tied up with
Ather (in which the company owns 34.58% as of July 2020) and with HeroHatch (an internal start-up).
Ather (the first Indian electric vehicle company) currently has 2 product offering- Ather 450 and Ather
450X and has also established EV charging infrastructure in Bengaluru and Chennai
otorcycle manufacturers.
apan. Before this
2011, Honda group sold its
t the termination of JV, the
s at 35.7% as of FY20
times on the back of a
r which it has tied up with
tch (an internal start-up).
ring- Ather 450 and Ather
hennai
Export vs Import
Domestic vs Export
Rest of the Worl 4% 4%
India 96%
Rest of the World
India
96%
INPUTS :-
PROFIT AND LOSS ASSUMPTIONS
Finance Cost 15 27 31
%age of Debt 7% 11% 14%
(INR in crs)
125 44 0 0 0 0 0 0
184 166 285 285 285 285 285 285
309 210 285 285 285 285 285 285
37 47 46.41 46 46 46 46 46
12% 22% 16% 16% 16% 16% 16% 16%
(INR in crs)
CAGR
7.92%
BALANCE SHEET ASSUMPTIONS
Working Capital
Trade Receivables 1282 1551.8 1427.0 2745.1
%age of Revenues 4.2% 5.0% 4.3% 8.1%
DSO 15.2 18.3 15.7 29.5
Other Equity
Opening Balance
Add Profit After tax
Less Dividend
Closing Balance 7,913 10,276 11,932 13,081
Profit After Tax 3,116 3,286 3,721 3,468
Dividend Payout Ratio 44.5% 48.5% 45.6% 54.7%
Dividend 1,384 1,721 1,697 1,897
Dividend Per Share 70 87 85 95
No. of outstanding shares 20 20 20 20
(INR in crs)
FY20 FY21 FY22 FY23 FY24 FY25 FY26
Actual Actual Forecast Forecast Forecast Forecast Forecast
Net Operating Profit After Taxes (NOPAT) 3,100 3,337 3,708 3,452
%age of sales 10.1% 10.8% 11.2% 10.2%
WORKING CAPITAL
Accounts Receivable 1,282 1,552 1,427 2,745
inventory 762 709 963 1,250
Other Current Assets 512 401 212 262
Acounts Payable 2,846 3,266 3,375 3,438
Other Current Liabilities 769 457 765 501
Working Capital (1,059) (1,062) (1,538) 317
Changes in Working Capital - (3) (477) 1,856
Gross Block
Opening Gross 5,296 5,746 6,983 7,721
ADD:
Additions 450 1,302 813 583
### ### 2.5% 1.7%
Foreign currency translation - 6 (6)
LESS :-Other
Disposals 0 65 69 82
Transition impact of Ind AS
Closing Block 5746 6,983 7,721 8,216
Accumulated Depreciation
Opening 1637 2,080 2,476 2,950
ADD
Depreciation for the year 443 452 530 548
Foreign currency translation 0 - 1 (2)
LESS
Disposals 0 55 57 72
Translation impact of Ind As 0 - -
Closing depreciation Reserve 2080 2,476 2,950 3,424
89 7 - - - - -
123 - - - - - -
9,771 10,345 10,963 12,192 13,637 15,217 16,972
79 - - - - - -
15 - - - - - -
3,985 4,723 5,390 6,117 6,955 7,801 8,739
FY19
Particulars FY16 Actual FY17 Actual FY18 Actual Actual
Net Operating Profit After Tax 3100 3337 3708 3452
Add: D&A 443 502 575 624
Gross Cash Flow 3543 3839 4283 4076
Less: CAPEX 450 1302 813 583
Less: Changes in Working Capital - (3) (477) 1,856
FREE CASH FLOW 3,093 2,541 3,946 1,637
(INR in crs)
FY20 FY21 FY22 FY23 FY24 FY25 FY26
Actual Provisional Forecast Forecast Forecast Forecast Forecast
3131 3007 3636 4146 4546 5026 5549
846 715 705 768 845 938 983
3977 3722 4341 4914 5391 5964 6531
1766 581 618 1229 1445 1580 1754
(859) (951) 280 (97) (211) (153) (129)
3,070 4,092 3,443 3,783 4,157 4,536 4,906
WACC
COST OF CAPITAL
Total Equity to Capital
Net Debt To Capital
Calculations:
Risk Free Rate
Equity Beta
Market risk Premium
Cost of Equity
!L17
TAL
99.43%
0.57%
6.01%
0.98
6.20%
12.09%
7.5%
25.17%
5.61%
12.02%
0.03%
12.05%
DCF VALUATION
WACC 12.05%
Terminal Growth 4%
Undervalued
(INR in crs)
SENSTIVITY ANALSIS
GROWTH
50,590 2% 3% 4% 5%
W 10.0%
A
C 11.0%
C
12.0%
13.0%
14.0%
6%
SOURCE :-
INCOME STATEMENT
CURRENT ASSETS
(a) Inventories 762 709 963
(b) Investments 3249 4544 5591
(c) Trade receivables 1282 1552 1427
(d) Cash and cash equivalents 179 74 131
(e) Bank balances 0 121 107
(f) Loans 23 25 29
(g) Other Financial Assets 79 145 543
(h) Other Current Assets 512 401 212
TOTAL CURRENT ASSETS 6086 7571 9002
1% 1% 1%
TOTAL ASSETS 12419 15312 17397
LIABILITIES
EQUITY AND LIABILITIES
Equity
(a) Equity Share Capital 40 40 40
(b) Other Equity 7913 10276 11932
(c) Non Controlling Interests 54 67 93
Total Equity 8006 10383 12065
CURRENT LIABILITIES
(a) Borrowings 84 40 75
(b) Lease Liabilities - - -
(c) Trade payables 2846 3266 3375
(d) Other Financial Liabilities 443 371 206
(e) Other Current Liabilities 769 457 765
(f) Provision 30 43 60
TOTAL CURRENT LIABILITIES 4171 4177 4481
40 40 40
13081 14366 15376
116 141 143
13237 14547 15559
125 44
- 208 212
146
121 124 176
613 473 453
859 849 987