HDFC Securities downgrades Hero MotoCorp to reduce, cuts target price to Rs 2,512

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26 Aug, 2025 12:21

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Brokerage firm HDFC Securities has downgraded Hero MotoCorp Ltd (HMC) to 'reduce' from 'buy' and revised its target price down to Rs 2,512.

Hero MotoCorp's market share is likely to decline further due to the introduction of Honda Motor and Scooter's (HMSI) 100cc motorcycle in the entry-level segment. HDFC Securities attributes this potential decline to the competitive pricing strategy of HMSI, which has launched Shine 100cc at a price of Rs 64,900. The launch of Shine 100cc demonstrates HMSI's strong commitment to establishing a foothold in this segment by leveraging the well-established 'Shine' brand in the 125cc segment and targeting sales of 300,000 units in the first year.

As per HDFC Securities, if HMSI effectively executes its plans, their entry into the 100cc segment could pose a serious threat to Hero MotoCorp.

HMC faces challenges as the market demand for motorcycles gradually shifts to 125cc from the 100cc segment, which has been the company's main strength.   This shift in the mix does not bode well for HMC as the company heavily relies on the 100cc segment, which accounts for 78 percent of its sales volumes and where Hero MotoCorp enjoys an 80 percent market share.

However, the company has experienced a significant decline in its market share in the 125cc segment, dropping from a peak of 55 percent in FY19 to just 21 percent. Despite efforts, HMC has been unable to regain its lost market share in this segment in recent times, HDFC Securities report said.

"HMC has a healthy launch pipeline for FY24, with the bulk of its launches likely to be in the 125cc and above segments, where it is trying to revive its share. However, we do not expect it to recover a meaningful share in these segments, given its multiple failed attempts in the past and significant competition in these segments," HDFC Securities said in its recent note.

Given these headwinds, the brokerage house has cut its earnings by 5 percent for FY24 and 15 percent for FY25. "We expect HMC to post 11% EPS CAGR over FY23-25, largely revenue led, as any benefit from softening input costs is likely to be ploughed back to recover back lost share. Since we expect HMC to further lose share over FY23-25, we lower our target multiple to 14x from 15x, to arrive at our revised TP of Rs2,512 per share," the HDFC Securities report said.