Hero MotoCorp (HMCL) posted Q3FY19 Ebitda of Rs 11 billion (down 4.6% y-o-y), in line with estimates. Higher inventory (six\u2013eight weeks) and sluggish demand are likely to keep near-term wholesales under check. Besides, down-trading is evident from sales of entry bikes racing ahead at 20% y-o-y. Hence, success of launches remains critical. While the recently launched Destini125 has gained a 14% market share in the 125cc scooter segment, Xtreme200R (premium motorcycle) received a modest response. Also Read:\u00a0Five important things for getting right life insurance cover: Read policy documents carefully We are trimming FY20e Ebitda by 6% to factor in the muted demand environment. The EPS cut is only 2% due to higher treasury income. We are also lowering the target multiple to 15x June 2020 core EPS (from 16x), reflecting weaker FY18\u201321e EPS CAGR of 4%. Maintain Hold with a revised TP of Rs 2,885 (from `3,149). Performance along expected lines: Revenue, up 7.5% y-o-y to Rs 78.7 bn, is 1% above our estimate. An adverse product mix and cost pressure dragged Ebitda by 4.6% y-o-y. Ebitda margin slid 180bps y-o-y and 112bps q-o-q to 14%. A sharp jump in other income drove PAT beat of 8.4% to Rs 7.7 bn (down 4.5% y-o-y). Going ahead, we expect margins to improve q-o-q driven by softer commodity prices and lower discounts (seasonality). Outlook and valuation: Fairly valued\u2014 We estimate volume\/EPS CAGR of 8\/4% over FY18\u201321e. We maintain \u2018HOLD\/SU\u2019, valuing the stock at 15x June 2020E core EPS + cash\/share of Rs 446. While the valuation is attractive (dividend yield of ~4%), we prefer to wait for signs of its success in premium and scooter segments. The stock is trading at 13.9x FY20e PER.