Buy Hero Motocorp; target of Rs 3200: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Hero Motocorp has recommended buy rating on the stock with a target price of Rs 3200 in its research report dated May 08, 2023.

Broker Research

May 09, 2023 / 14:14 IST

Buy

26 Aug, 2025 12:21

Volume

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Prabhudas Lilladher's research report on Hero Motocorp

Hero Motocorp’s (HMCL) expanded its EBITDA margin by c150bps QoQ, largely led by inventorisation which may reverse in FY24. The company plans for an aggressive model launch cycle in premium (including Harley-partnered bike) and lower cc segment to aid revenue growth. It also plans on expansion of exports revenue from 5% to 10%-15% over the medium term. However, with low market share in scooter segment, HMCL’s aggressive EV plans may not cannibalize volumes and help it grow its scooter portfolio. We like HMCL’s aggressive stance but investors will have to wait to see initial success before any re-rating for the stock. The company trades at nearly half the PE multiple, as compared to peers. We expect margins to improve in the near term from operating leverage, premiumisation, cost controls and stable commodity costs (we build in c170bps increase over FY23-25E). Key monitorables would be 1) performance of new launches, 2) uptick in EV volumes, 3) competition in core segments and 4) recovery in rural markets. We adjust our estimates by less than 1% after factoring 4Q results and management commentary for FY24E-FY25.

Outlook

Maintain ‘BUY’ at an unchanged TP of Rs 3,200 (at 15x on Mar-25E standalone EPS, Rs 87 for Fincorp and Rs 78 for Ather).

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