Hero Motocorp stays on top gear on robust sales, hopes of demand revival

Hero Motocorp is keeping to the fast lane riding on strong sales in March and Street optimism for recovery in two-wheeler (2W) segment.

The stock zoomed nearly 2.5 percent to Rs 2,520 at 10am on the BSE on April 24. It gained nearly 8.5 percent over the last month.

Follow our live market updates and in-depth analysis here

The company sold 5,19,342 units in March, which was a 15 percent increase over 4,50,154 units a year ago. In FY23, it sold 53,28,546 units, which was 8 percent higher than what it sold in FY22. The improvement was driven by domestic sales with export figures falling year-on-year.

In March, the company sold 5,02,730 units in the domestic market, which was more than a 20 percent increase from a year ago. But it sold only 16,612 units in the exports market, which was a fall of around 51 percent from a year ago. In FY23, domestic sales went up 11 percent YoY to 51,55,793 units but exports fell 43 percent YoY to 1,72,753 units.

Strong domestic sales figures seem to have helped improve the Street sentiment towards the stock, with analysts expecting a recovery in domestic two-wheeler (2W) demand.

Also read: MOSL sees Hero Motocorp’s PAT rising by 17.6% YoY in Q4FY23

Jefferies, which has a ‘buy’ call on the stock, stated in a note that the demand revival should benefit Hero, though the demand profile may affect the company’s sales negatively.

“We expect scooters and 125cc+ premium motorcycles to grow faster than sub-125cc motorcycles though, which would result in the demand profile shifting adversely for Hero,” they wrote.

They see Hero’s volumes posting a healthy 14 percent CAGR over FY23-25, although lower than our estimate of 18 percent for the industry. “Sustainable success in premium bikes, EVs or exports could improve Hero’s long-term outlook,” they added.

The analysts expect 29 percent EPS CAGR over FY23-25 and, in the report, pointed out that the stock is trading at a valuation multiple (12x/10x FY24/FY25 PE) lower than its long-term average of 16x, which makes it an attractive buy.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.