Buy Hero Motocorp; target of Rs 3135: Prabhudas Lilladher

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26 Aug, 2025 12:21

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We trim our EPS estimates by c2% for FY24E-FY25 each, led by c2% cut in revenue. Hero Motocorp’s (HMCL) 3Q EBITDA margin at 11.5% (-67bps YoY, +7bps QoQ) came slightly lower than our estimates at 11.8%, due to 70bps impact from Vida launch and higher discounting. We expect 2W industry to benefit from rural recovery, low base of export markets and stable pricing environment (as commodity prices cool down in FY24). Accordingly, HMCL is also expected to show double-digit revenue growth in FY24 given (1) product launches in premium/scooter segment, (2) improving market share and (3) higher exports. We expect HMCL’s margins to improve in the near term from operating leverage, premiumisation (3QFY23: 30% of volumes vs 20% during last festive season), cost control and stable commodity costs (we build in 230bps expansion over FY22-25E).

The company is investing in EVs and aims to have wider product portfolio in next 18-24 months. Maintain ‘BUY’ at an unchanged target price of Rs 3,135 (at 15x on Dec-24E standalone EPS, Rs 86 for Fincorp and Rs 78 for Ather).

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