The world’s largest two-wheeler manufacturer Hero MotoCorp Limited (HMCL) is well-positioned for robust growth, driven by a resurgence in domestic two-wheeler (2W) demand and a strategic approach to expanding in premium and electric vehicle (EV) segments, according to a report by Motilal Oswal.

The festive season witnessed a rebound in domestic 2W demand, recording a notable 22 per cent YoY growth with 22 lakh units sold during a 33-day period. The upward trajectory is expected to continue, fuelled by strong demand during the ongoing marriage season, particularly in central and northern regions where HMCL has a solid market share.

Strategic geographic presence

Hero MotoCorp is expected to be the major beneficiary of this demand surge, especially in states like UP, Rajasthan, MP, and Bihar, contributing to approximately 35 per cent of domestic 2W demand. The company's strong presence in these regions positions it favourably for further growth.

The sustained growth is anticipated to expand Hero MotoCorp’s core 100CC/110CC portfolio, constituting about 80 per cent of its overall volumes. Although recovery in the 100cc segment has been gradual, HMCL is poised for further gains with the positive momentum.

Premiumisation and EV focus

The company’s growth strategies include venturing into premium segments with multiple products planned in the 200-400cc category. Additionally, the company is making strides in the EV market, aiming to penetrate 100 cities by the end of December 2023. The launch of new products and network expansion are integral components of its approach to the evolving EV landscape.

Furthermore, the response to Harley Davidson and Triumph has shown improvement, with dealers reporting fewer cancellations. The company’s new product launches, including the redesigned Karizma XMR, have garnered attention, with mass dispatches yet to commence.

Ather's performance and growth outlook

Ather, in which HMCL holds a crucial stake, is performing well in the premium category despite a reduction in FAME-2 subsidy. With a monthly volume run rate of approximately 8,100 units in the first eight months of FY24, Ather's market share has increased to 12.1 per cent.

Motilal Oswal reiterates Hero MotoCorp as a top pick in the OEM space, projecting a 7 per cent volume compounded annual growth rate (CAGR) over FY23-25.

The company is expected to benefit from increased competitiveness, growth in premium and scooter segments, and a ramp-up in exports. 

Financial performance 

Hero MotoCorp’s net profit surged 47 per cent annually to Rs 1,054 crore, from Rs 716 crore in the year-ago period. The net profit growth came on the back of higher prices and easing commodity costs. Its revenue from operations increased 4 per cent to Rs 9,445 crore. 

Hero MotoCorp sold 1.42 million units in the September quarter, compared to 1.35 million units a quarter ago. 

The company’s earnings before interest, taxes, depreciation and amortisation (EBITDA), also known as operating profit soared 28 per cent annually to Rs 1,328.29 crore. The rise came due to easing input costs, price hikes, and a favourable product mix.

The shares of Hero MotoCorp have soared nearly 44 per cent this year to date (YTD). As of 12:20 pm, shares of the company were trading marginally higher at Rs 3,900.75 per share.

The brokerage maintains ‘Buy’ rating, with a revised target price of Rs 4,480.