COMPANY HISTORY 

Hero Honda, one of the leading Two-wheeler makers in India, was incorporated in the year 1984 by Munjal Brothers the owners of HERO Cycles as a 50/50 joint venture with Japan based Hondo Motor Limited (HML).Hero Honda CD-100 was the first four stroke motor cycle to be introduced in India in 100cc range. It is true that over 19 million Hero-Honda products are now on the road. The company is having a wide area of service network with more than 3,000 customer touch points. It is significant to realize that HHML enjoys a good recognition and trust in rural areas. Hero Honda bikes currently rollout out two manufacturing units at Dharuhera and Gurgoan in Haryana.

The Company is planning to start its third unit at Hardwar in Uttaranchal. The Company’s products include CD-100, Sleek, Joy, Ambition, CD-Dawn, and Glamour. The company is has a very valuable model, its Evergreen model “SPLENDOR”, which was named as the largest selling motorcycle in the world. Over the period Hero Honda has rolled out bikes such as CBZ Extreme, Passion, and Karizma to take on competition and create a niche for itself in the high end two wheeler markets. Recently it has also entered in scooter manufacturing, with its model PLEASURE mainly aimed at girls.  Hero Honda bagged many awards. It got the NDTV and Overdrive Magazine’s Bike manufacturer of the year. It also got TNS voice of Customer awards for the No.1 Executive Motorcycle, No.1 premium Motorcycle and No.1 Standard Motorcycle. The Company recently rolled out a new model bike “HUNK”. 

FINANCIALS 

The company recently announced its Q1 FY09 financial results. These results compared with its last quarter results and tabulated below 

The company posted Net profit of Rs.2,728 Million, an increase of 44% as against the same quarter last fiscal. Total income for this quarter moved up to Rs.28.9 Billion from Rs.24.86 Billion reported in the quarter ended June 30 2007. The EBDITA margin declined to 11.99%, where it was about 14.76% in the last quarter ended March 31 2008. Operating profit declined by 17% as against the last quarter. Total expenditure for this quarter moved up by 14.5% as against the same quarter a year ago. The Operating costs for this quarter is high when compared to the past quarters because of the rise in the raw materials such as Steel, rubber, Aluminum etc and huge cost made for IPL sponsorship. However vigorous cost cutting measures have helped the company to improve profitability over the past year by nearly 300 basis points. 

SALES  

The company is unassailable in its market leadership as it holds 55% of the two wheeler market. During the current year it started production in its new manufacturing plant at Haridwar in Uttaranchal. The company faced a 9% growth in sales in the month of April and 9.5% and 16% in the month of May and June respectively. Total sales of the company for the first quarter this year stood at 894, 244 units, an increase of 11% as against 802, 853 units sold in the corresponding period a year ago.  

COMPANY OULOOK

 The increase in manufacturing cost (raw materials such as Steel aluminum, copper, nickel and rubber), double digit inflation, fuel price increases and hike in the interest rates for Auto loans have depressed the demand of two wheelers in the market. It is planning to extend its markets in Semi-urban, rural and upcountry areas. The company recently reported that it is planning to export two wheelers to Sri Lanka from the upcoming quarter.  

STOCK OUTLOOK  

The stock is moving in the region of Rs.770-840 and is expected to achieve New Year high in this month. This stock is one of the out performers of January fall. The stock is in a short term downward trend since hitting Rs.860 in the first week of May. The stock resumed from this trend and gained nearly 28% in a short span of three weeks. The company has a strong support level at Rs.630 and near term resistance at Rs.865. The short term investors can accumulate this stock at the existing level.