Hero MotoCorp Q2 Review: Analysts Upbeat On Rural Demand Revival Hope, EV Strategy
Here’s what brokerages have to say about Hero MotoCorp’ second-quarter results:
Most brokerages remained upbeat on Hero MotoCorp Ltd. as they expect a bounce back in rural demand, better exports and electric vehicle launches to aid India’s largest two-wheeler maker.
The company, in its second-quarter results filing, said it expects a build‐up in demand over the coming quarters as the economy continues to show recovery and improvement. Positive economic signs, encouraging farm activities and increased need for personal mobility is likely to restart the momentum in the two‐wheeler industry, in rural and semi‐urban markets.
The two-wheeler maker saw its net profit jump more than twofold sequentially in the July-September period. Its revenue rose more than half and margin widened during the period.
Its sales increased 40% over the preceding three months.
Of the 48 analysts tracking Hero MotoCorp, 28 have a ‘buy’ rating, 15 suggest a ‘hold’ and five recommend a ‘sell’, according to Bloomberg data. The 12-month consensus price target implies an upside of 18.5%.
Here’s what brokerages have to say about Hero MotoCorp’ second-quarter results:
Dolat Capital
Maintains ‘buy’ with a price target of Rs 3,185 apiece, implying a potential upside of 19%.
Numbers beat estimates led by a better-than-expected net average selling price and efficient cost management.
Rural demand to pickup, led by record Kharif harvesting and marriage season demand.
A sharp jump in exports volume recently and it reached a run rate of 300,000 vehicles annually versus 200,000 vehicles FY21.
Low vulnerability to electric vehicles, as scooter accounts for just 8% of volumes and its core 100cc motorcycle business is less prone to the risks from EVs.
Emkay Global
Maintains ‘buy’ with a price target of Rs 3,700 apiece, implying a potential upside of 37.8%.
A gradual recovery in domestic volumes supported by improving macros and opening of educational institutions/hospitality sector.
Exports expected to see a 15% CAGR, owing to improved penetration in Africa and Latin America regions.
EV launches to boost performance ahead.
Motilal Oswal
Maintains ‘accumulate’ with a price target of Rs 3,100 apiece, implying a potential upside of 16%.
Performance driven by higher realisation and efficient cost management, despite high cost of inflation.
Poised for faster recovery over peers due to its rural-focused portfolio and market leadership in the entry and executive segments.
Nascent exports business and premium segment are showing good traction.
Low vulnerability to EVs, as it gets just 8% of volumes coming from scooters and its core 100cc motorcycle is less prone to EVs.
Nirmal Bang Institutional Equities
Maintains ‘buy’ with a price target of Rs 3,000 apiece, implying a potential upside of 12%..
Strong results, revenue and margins surprise positively.
Underlying demand drivers intact and should lead to positive momentum and volume support in the coming quarters.
Channel checks indicate uptick in the entry-level segment (with high price resets getting gradually absorbed) and improving rural sentiments.
Hero Moto’s EV strategy well-hedged compared to competition.