Analyst Call Tracker: Hero MotoCorp, Eicher see most upgrades, but Tata Motors faces heat

The Tata Motors stock is currently trading 32 percent lower from its all-time high of Rs 1,179.

The two-wheeler industry is accelerating on the back of festive cheer, rising rural demand and a shift toward premiumisation. The rosy outlook is also bolstered by a good monsoon and a bustling wedding season. While all major two-wheeler Original Equipment Manufacturers (OEMs) stand to gain, analysts are particularly optimistic about Hero MotoCorp, the world’s largest two-wheeler manufacturer, and Eicher Motors.

Data reveals that Eicher Motors and Hero MotoCorp have reported the highest upgrades in November. On the contrary, Tata Motors — India's leading electric vehicle (EV) manufacturer — has faced the most downgrades, reflecting waning analysts' confidence.

In November, Hero MotoCorp received 27 "buy" ratings, 7 "hold" calls, and 8 "sell" recommendations, according to Bloomberg data. For Eicher Motors, 16 analysts rated it a "buy", 13 suggested a "hold" and 12 recommended a "sell". Tata Motors garnered 22 "buy" calls, 9 "hold" calls, and 5 "sell" recommendations.

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The Hero MotoCorp management has highlighted that rural and urban regions reported healthy participation and it expects the trend to continue in the upcoming period. While rural market grew faster than its urban counterparts, both regions recorded a double-digit growth.

"The management is concentrating on launching new products in the premium category, expanding the EV portfolio to include more affordable options, establishing new Premia stores and Vida Hubs and upgrading existing stores and service centres to Hero 2.0 standards," Axis Securities said in a note.

Other market experts suggested that the company's focus on premiumisation through its partnership with Harley Davidson, launching key models such as the Maverick 440, Karizma XMR, HD X440 and Xtreme 160R 4V in the mid-to-premium segment over the past year, bodes well in the coming quarters.

Jefferies maintained a "buy" rating on Hero MotoCorp. It has raised concerns over market share declines in the two-wheeler segment and shifts in demand patterns. However, the international brokerage firm remained optimistic about the sector’s potential for double-digit growth over the next three years, viewing success in premium bikes and EVs as key drivers for the stock's upside.

Nuvama said that Hero possesses the ability to benefit from a two-wheeler industry upcycle, especially in rural markets. The brokerage firm has forecast an 8 per cent revenue compound annual growth rate (CAGR) and a 10 per cent core earnings CAGR between financial year (FY) 2024 and 2027. The optimism stemmed from healthy free cash flows and a 4 per cent dividend yield.

What's fueling optimism in Eicher Motors?

Royal Enfield continues to dominate the more than 250 cc segment in India, bolstered by regular new launches such as the Guerilla 450 and Classic 650. The brand has also ventured into the EV market with its Flying Flea brand, showcasing models slated for release in early 2026.

"With a growing focus on export markets and expanding assembly operations, Royal Enfield is poised for significant growth, with an estimated addressable export market of 10 lakh units compared to 80,000 units in FY24. With new launches on the horizon and ongoing progress in the EV space, Royal Enfield's long-term growth prospects within Eicher Motors remain strong," said analysts at ICICI Securities.

Jefferies also highlighted that Royal Enfield volumes have shown signs of picking up, and expected it to be a key beneficiary of the two-wheeler premiumisation trend. Factoring these in, Jefferies estimated that the toughest phase of competition for Eicher Motors is behind, prompting it to retain its "buy" call on the stock. Analysts also maintained that the shift in management strategy to focus more on growth rather than margins will help the company perform better in the coming quarters.

What's gone wrong for Tata Motors?

In a dramatic turnaround, Tata Motors, which was the top Nifty gainer with a remarkable 101 percent rise in 2023, has faced a difficult year. What has changed in just a year? The four-wheeler industry is grappling with a high-base effect, while the election-related slowdown and soaring temperatures during summer have dampened momentum in auto stocks.

But it is not that Tata Motors doesn't have issues of its own. The company, with a commanding 58 per cent market share in EVs — as of October 2024 — currently leads the pack with a portfolio that includes five brands of EVs such as Nexon, Punch, Tiago, Tigor, and the newly launched Tata Curvv. However, its dominance is under pressure— down from a 74 per cent share a year ago—as rivals like Mahindra & Mahindra (M&M) and Maruti Suzuki step up.

UBS cited a major downside risk from margin slippage at the company's luxury arm Jaguar Land Rover (JLR) and within the domestic passenger vehicles segment. The brokerage remained cautious as it cited that the extended successful run of JLR's premium models such as Defender, Range Rover and Range Rover Sport have started to moderate. It noted that the order book for this trio has now hit pre-Covid pandemic levels and soon expects discounts for Range Rover to rise. Tata Motors offered steep discounts during the festive season but still struggled to drive significant EV sales, highlighting sluggish demand.

Besides, competition from other OEMs such as Mahindra and Mahindra, Maruti Suzuki, and Hyundai Motor India has become feisty, adding to investors' concerns. Automobile analysts opined that while the company has the first-mover advantage, M&M and Maruti appear to be the best contenders. Mahindra just launched two new EV vehicles XEV 9e and BE 6e, locking horns with Tata's Curvv and its flagship brand Nexon.

Maruti will make its highly-anticipated EV debut with the e-Vitara, an electric sports utility vehicle (SUV) set to roll out from Suzuki’s Gujarat plant next year. This vehicle will cater to both domestic and global markets, with nearly half of its production earmarked for export.

The Tata Motors stock is currently trading 32 per cent lower from its all-time high of Rs 1,179.

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