Buy Hero Motocorp; target of Rs 3380: HDFC Securities

HDFC Securities' research report on Hero Motocorp

Hero continues to gain market share (currently at 39%, +300bps YTD), driven by its revamped product strategy and higher rural share. While festive season trends for the industry have been subpar, we believe that Hero has outperformed the market in the mass market 100cc segment. Further, the premium strategy has got a leg up with the OEM’s arrangement to sell and manufacture products of Harley Davidson, the benefits of which will be visible in the medium term.

Outlook

We maintain BUY. We trim our FY22/23 estimates by ~6% to factor in lower-than-expected industry volumes and set a target price of Rs 3,380 at 19x Sep-22E EPS (at a 15% premium to its long-term average trading multiple, 20x earlier). The key risks are slower-than-expected industry growth and a rise in competitive intensity.

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