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
