Buy Hero MotoCorp; target of Rs 5269: Geojit Financial Services

Geojit Financial Services research report on Hero MotoCorp

Hero MotoCorp (HMCL) is India’s leading two-wheeler manufacturer, with nearly 32% share of the domestic motorcycle market in volume terms. The company has eight manufacturing facilities — six in India and one each in Colombia and Bangladesh. In Q2FY25, Hero MotoCorp's standalone revenue increased 10.8% YoY to Rs. 10,463cr, driven by a 7.3% rise in sales volume and higher average selling prices due to better product mix. The company’s parts, accessories and merchandise business saw a record high revenue of Rs. 1,456cr, up 7.5% YoY, contributing 13.9% to its total revenue. EBITDA rose 14.1% YoY to Rs. 1,516cr, primarily driven by lower material costs and product mix improvement. EBITDA margin increased 40bps YoY to 14.5%, despite a 200bps impact from electric vehicle (EV) operational expenses. The ICE segment EBITDA margin improved 160bps to 16.5%. The management reaffirmed its overall EBITDA margin guidance at 14-16%. During the 32-day festival season, the company achieved a record 1.6 million unit sales, resulting in a 16% YoY revenue increase. Its Vahan market share rose to 31.6% during the period.

Outlook

The company's upcoming new model launches, brand strengthening and pricing strategies in both ICE and EV categories are also expected to contribute to its growth. Therefore, we reiterate our BUY rating on the stock with a target price of Rs. 5,269, based on 20x FY26E adjusted EPS.