Hero MotoCorp to underperform Sensex: Morgan Stanley
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Morgan Stanley says Hero MotoCorp's shares will fall relative to India's benchmark index over the next 60 days on the back of "disappointing" Q3 earnings.
India's largest motorcycle maker missed estimates for the fourth straight quarter as net profit fell 20.4 percent on rising costs and falling sales that battered margins.
The investment bank maintains its 'underweight' rating on the stock, while reducing its earnings estimates by 5 percent for FY13, and 3 percent for FY14, saying that the decline in Hero's margins is more structural than cyclical.
"Most of the miss came at the operating level and was attributed to lower gross margins of new launches (Maestro and Ignitor) and increased sales promotion costs," Morgan Stanley said in the report.
Hero MotoCorp has fallen 4.3 percent in 2013 as of Thursday's close, compared with a 2.8 percent rise in India's benchmark index in the same period.
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