Hero MotoCorp shares fall on inventory build-up

July 20, 2012 ஆக்கம் sknlakshmi

Reuters Market Eye - Shares in Hero MotoCorp <HROM.NS> fall 1.8 percent after the motorcyle maker said inventory levels have risen to 4 weeks from a usual average of 2 weeks, according to analysts who heard the remarks in a company conference call on Thursday.

Hero MotoCorp on Thursday reported an increase of 10 percent in its net profit for the April-June quarter, which lagged estimates.
CLSA downgrades the stock to "sell" from "under-perform" while retaining its target price at 1,950 rupees.

Removing the inventory build-up from Hero's January to June volumes means the two wheeler maker's growth would drop to 0 percent during this period, compared to the reported growth of 8 percent, CLSA said in its report.

"We fear that Hero will have to start heavy discounts and/or cut production in 2H if festival season demand is not strong, which could easily be the case," CLSA said.

India has a number of festivities in the second half of the year, including Diwali, in which auto makers introduce promotions to spur sales.