Emkay Global Financial's research report on Hero MotoCorp
HMCL’s stock price has corrected 11% from the recent highs, even as newly launched Xtreme 125R in the fast-growing 125cc motorcycle category has been received well (per dealer checks), and led to reversal in market share (15.7% in Mar-24 vs. 9.7% in Dec-23; peak share of 50%). Product action coupled with sustenance of the dom. 2W growth story (Apr-24 MTD retails up ~26%) and positive initial outlook for monsoons (key rural demand trigger) prompt us to build-in 12% EPS CAGR over FY24E-26E (upgrade FY25E, FY26E EPS by ~4.5% each).
Outlook
Valuations remain attractive (17x FY26E PER vs. over 25x for 2W peers with ~4% div. yield; HMCL’s discount to BJAUT at a new high); we upgrade HMCL to BUY with revised TP of Rs5,100/sh; 20x core FY26E P/E (Rs4,800; 19x earlier). Sustained performance of recent launches poses major upside risk.
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