Hero MotoCorp shares slip 2% as UBS reiterates 'sell', sees 45% downside

Hero Moto shares have posted solid returns, rising nearly 50 percent since the start of the year.

Shares of Hero MotoCorp Limited started the trading session on a weak note after falling over 2 percent to Rs 5,935 in the morning on September 26 after UBS reiterated its bearishness on the counter with a 'sell' call as it sees multiple concerns for the two-wheeler major.

With a price target of Rs 3,350, the international brokerage sees a massive downside of 45 percent from the last close of Rs 6,088 on the NSE. Hero Moto shares have posted solid returns, rising nearly 50 percent since the start of the year.

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The brokerage noted that while wholesale volumes and festive optimism are creating a positive sentiment, these are masking the retail underperformance. Despite new product launches, the world's largest two-wheeler company has seen a substantial loss in retail market share, with September 2024 figures falling below 24 percent. The stock is currently trading at 26 times FY26 projected earnings, which is more than three standard deviations above its five-year historical average.

The company recently informed its shareholders that it will start Brazil operations fourth quarter of the financial year 2025. The dispatch has already started to the Philippines in March 2024, it said. In May, the company stated that it plans to set up a unit in Brazil that will be involved in manufacturing and distributing two-wheeler vehicles, parts, and accessories.

Hero had originally announced plans to enter the Brazilian market in 2014, but the plan was shelved when the Brazilian government insisted on fuel that was a mixture of petrol and ethanol, Reuters reported.

During the first quarter, it reported a 36 percent year-on-year rise in standalone net profit to Rs 1,122.63 crore led by strong sales, a rural market recovery, and new launches like the Xtreme 125R.

At about 9:20 am, shares of the company were trading at Rs 5,941, lower by 2.5 percent from the last close on the NSE.

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