Hero MotoCorp shares rally over 100% in a year. Brokerages see further upside of up to 30%

VIDA is an emerging mobility brand of Hero MotoCorp and its new package offers hassle-free EV ownership for customers. “The pack offers an enhanced ownership experience with benefits and services valid over a 5-year period. This unique after-sales package will be available to customers at no cost till April 30, 2024,” said the company in a press release.

Sharekhan has reiterated its ‘buy’ rating on Hero MotoCorp on healthy recovery in Ebitda margin, strong response to its latest products, continuous focus on premiumization, and expansion of its EV markets. The company expects double-digit revenue growth for the two-wheeler industry in FY2025 and has guided to grow ahead due to its product launch strategies, it said.

“The premium scooter segment would continue to maintain traction in FY25. Hero Moto aims to gain a meaningful market share in the premium motorcycle segment in the next five years. Commodity costs have been stabilised and the company continues to aspire for an Ebita margin of 14-16 per cent. It would focus on more of its top-10 export markets out of 50 markets in hand,” it said.

Premiumisation in individual sub segments would drive the two-wheeler segment’s revenue performance in the coming years as customer aspirations in each of the sub segments have been rising. With continuous investment in the economy, entry-level customers would also come back on a rise in affordability, say the market analysts.

With a slew of launches and renewed focus on the premium motorcycle segment, the company has registered traction in its business, given the recovery in the two-wheeler segment is supporting its topline performance, said Sharekhan. Focusing on brands, models, portfolios, and premium stores.

Shares of Hero MotoCorp shed about a per cent to Rs 4,631.90, on Wednesday, commanding a total market capitalization of more than Rs 93,000 crore. The stock has surged more than 100 per cent in the last one year, while it has gained over 55 per cent in the last six months.

“We believe Hero has a headroom to stimulate demand in its key markets for entry-level products as after the premium category, the 125cc segment has already recovered. With its Hero 2.0 stores, the company is continuing to focus on bringing premiumisation to its distribution system. We retain our BUY rating on the stock with an unchanged target price of Rs 6,057,” Sharekhan adds.

However, the brokerage has highlighted product failure risk amid aggressive launches, rise in raw material cost and increased competition along with a delay in recovery in the rural market would stem its growth prospects as the key risks for the company.

Hero MotoCorp is among the the top auto picks on Nuvama Institutional Equities, which sees an 6 per cent year-on-year (YoY) rise in its overall volumes to 5,50,000 units in the financial year 2023-24. The brokerage previously had a buy rating on the stock with a target price of 5,600.

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