Buy Hero Motocorp; target of Rs 2959: HDFC Securities

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26 Aug, 2025 12:21

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Hero MotoCorp’s (HMC) Q3 PAT, at INR 7.1bn, was in line with our estimate of INR 7bn. EBITDA margin remained stable QoQ, on expected lines, as benefits from softening input costs were offset by weak volumes in Q2 (down 13% QoQ). Management is hopeful of a rural revival in the coming quarters on the back of the positive rural sentiment and hence expects the 2W industry to post double-digit revenue growth in FY24. HMC would target to outperform industry growth and recover back lost market share, especially in the 125cc and above motorcycle segment as also in scooters, on the back of a healthy launch pipeline—it aims to launch one new model each quarter from here on. Its recent launch, Xoom, in the 110cc segment, comes loaded with many segment-first features and is in line with the same strategy highlighted above.

However, given a lower-than-expected demand in Q3 and sustained weakness in Q4, we lower our earnings estimates by 1-6% over FY23-25E. At 14.7x FY24 PER, the valuation is attractive. We maintain BUY with a revised TP of INR 2,959 (from INR 3,086)—valued at 15x September 2024 earnings.

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