Hero Motocorp stock gains as February sales rise 19%

Hero Motocorp shares jumped 1.56 percent to Rs 4,577.45 on March 2 after the company reported a 19 percent jump February sales from the year-ago period.

The country’s largest manufacturer of motorcycles and scooters sold 468,410 units during the month, a 19 percent growth over the 394,460 units in February 2023.

The company said it is scaling up the volumes of Harley-Davidson X440 and Mavrick 440, the first phase of which should be completed by the middle of this year.

The company sold 433,598 units in January 2024.

In February, the company almost doubled its exports to 23,153 from 12,143 units in the same month of the previous year.

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The company is revving up in the electric vehicle space with the launch of the Vida V1 model and expects to launch more scooters and motorcycles. Four scooters are expected to be launched in FY25. The focus remains on expanding the charging ecosystem through its efforts and collaboration with Ather.

The stock has gained over 85 percent in the past year but has fallen over 3 percent in the last month.

Financials

Hero MotoCorp registered a 51 percent on-year jump in standalone net profit to Rs 1,073.38 crore for the quarter ended December 31, 2023, owing to easing input costs, operative leverage, higher average selling price, price hikes, and a surge in volumes. Net profit stood at Rs 711.06 crore during the same period last year.

The New Delhi-based two-wheeler manufacturer’s turnover for the third quarter of this fiscal grew by 21 percent to Rs  9,723.73 crore.  In Q3FY23, the company clocked a revenue of Rs 8,030.98 crore.

However, the Q3 margin, at 14 percent, was down 10bps QoQ despite the 3 percent QoQ volume growth and improved mix, due to higher promotional spending.

Brokerage Calls

Nuvama forecasts revenue/earnings CAGR of 10 percent/23 percent over FY23–26E with healthy FCF generation (Rs 38 billion per year) and dividend yield (~3 percent).

The brokerage maintains “buy” and raised the target price to Rs 5,600 from Rs 5,000.

Despite the company maintaining a healthy launch pipeline largely focused on the 125cc and above segments, HDFC Securities expects it will not lead to substantial recovery, given its patchy track record of new launches in these segments.

The domestic brokerage has a “reduce” call on the stock  but a higher target price of Rs 3,535, up from Rs 2,844, as it rolls forward to March 2026 earnings.

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