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Thursday, February 25, 2010

Evergeen Automobile Stock To Buy - Hero Honda

It’s simply amazing how Hero Honda can constantly churn out appealing new bikes with panache, beating obsessive competitors like Bajaj auto.

It bucked the industry downturn last year, when it sold more two-wheelers (a powerful mix of premium brands like Karizma, Achiever, Hunk and CBZ backed by successful entry-level brands like Splendor, Glamour and Passion) than the combined volumes of the second-, third- and fourth-placed competitors.

Indeed, over two decades, Hero Honda has surprised at every turn: strategically focusing on motorcycles, avoiding missteps (such as mindless diversifications or mismanaging cash) and, finally, managing its partnership with Honda as well as technological improvements even as Honda launched its own motorcycles.

The stock price, trading at around Rs 500 five years ago, is now at Rs1,600. Shareholders have been rewarded with 243% return over five years when Hero Honda’s RoE averaged 41%, backed by a fat operating margin of 18%.

The stock was available cheap in May 2004 and October 2008. When panic strikes, calculate whether the price is low enough for the market-cap to be 0.9 times sales and 6 times operating profit and jump in to buy stocks.
Ref. & Source: Moneylife

2 comments:

  1. you are right but we have to take consideration of new big player coming in this 2 wheeler segment like M&M

    ReplyDelete
  2. Some times we ignore the promotion freebies that come with the motor oil that we buy.. Recently i bought a Castrol promotion pack for my bike but wasn't informed by the dealer that the scratch card offer to enter the lucky draw to go to South Africa World cup games and the dealer has assured gifts that we can collect at the time of purchase. Make sure you ask your service dealers for the contest details if you buy one in the near future and collect your assured gift :)

    ReplyDelete

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