Buy Hero MotoCorp; target of Rs 5600: Emkay Global Financial

BUY

Emkay Global Financial's research report on Hero MotoCorp

HMCL reported a healthy Q3 with 5% revenue growth led by higher ASPs as volumes were flat. Domestic 2W market share rose by 70bps QoQ to 28.7% (declined by 120bps YoY), aided by the festive season. EBITDA margin sustained at 14.5% (flat QoQ) with underlying ICE margins coming in at 16% (vs 16.5% in Q2FY25; down by 50bps QoQ due to elevated marketing spends during festive). Management maintains its double-digit revenue growth guidance for FY25 with similar growth in FY26 as well. HMCL remains optimistic about growth prospects of the 2W industry, driven by sustained demand as well as recovery in rural and urban areas; it guides ahead of industry growth led by expansion of its 125cc portfolio, new product launches in motorcycles, scooters, and EVs.

Outlook

Our estimates are unchanged; we retain BUY with an unchanged SoTP-based TP of Rs5,600 at 20x Dec-26E PER. Risk-reward remains attractive; HMCL currently trades at 14x Dec-26E core per vs ~24x-28x for peers.

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