Prabhudas Lilladher's research report on Hero Motocorp
We increase our FY25-26E EPS estimates by 4%/8.5% to factor in volumes from new launches and sustained rural recovery post Hero Motocorp’s (HMCL) launch of Xtreme 125R and Mavrick 440 (pricing not revealed yet) at Hero World Day 2024. Xtreme 125R (filling white space in 125cc sports segment) should start meaningful contribution to volumes in FY25E. HMCL is undergoing an aggressive model launch cycle focused on addressing white space in existing segments and towards premium products. Including above two, HMCL has launched 5 new products in the last year and 3 new engine families, which should start contributing meaningfully to volumes from FY25 onwards. Key focus is on 1) winning in premium segment (from 125cc to 450cc); 2) building EV leadership (3 new product launch expected in FY25), 3) using digital mediums to expand reach and improve customer experience.
Outlook
We believe, HMCL is moving in the right direction and further re-rating is possible if premium segment volumes start becoming meaningful. Also with rural market seeing sharp recovery we see HMCL to be a key beneficiary from the trend (Rural trend reversal visible). The company trades at a PE of c19x on FY25E, more than c30% discount versus its peers’ average. We rollforward to Mar-26 and maintain ‘ACCUMULATE’ rating with TP of Rs 4,800 at 18x PE Mar-26E standalone EPS (Rs 84 for Fincorp and Rs 115 for Ather).
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