Hero Honda (HH) dispatches for the month of Jan'11 were above estimates with total dispatches of 467k units as against our estimate of 444k units. Dispatches during the month were higher by 19.7% on a YoY basis. However, on a MoM basis dispatches were lower by 6.9%.

We maintain a `HOLD' rating on the stock with a price target of Rs1,699 discounting FY12E earnings 16x.

BJAUT dispatches for the month of January were up 18% to 313k units as against our expectations of 3.05k units. Domestic sales jumped by 8% to 210k units and are likely to continue with the same robust growth as company plans to add 130 new dealers across the country to increase the penetration in the high growth rural segment. Export markets reported a growth of 44% to 104k units. Motorcycle segment grew by 18% to 276k units. Three wheelers also witnessed a steady growth of 15% to 38k units. Three wheeler growth is likely to be robust with strong demand in both domestic and overseas markets.

We expect BJAUT to achieve volumes of 4.5mn units during FY12. The management is targeting a volumes of 4.8mn units. We expect profitability to be sustained at 20% range.

However to account for concerns like high fuel prices and raw materials costs impacting future demand, we are reducing our multiples on the stock to 16xFY12E earnings against earlier 18xFY12E. We reiterate `BUY' on the stock with a revised target of Rs1,649.