Target: ₹3,200
CMP: ₹2,952.50
We attended Hero MotoCorp’s (HMCL’s) analyst meet and leadership interaction to understand future business strategy.
The company is making concerted efforts to accelerate profitable growth going ahead. Recent product interventions (Xtec and Xoom) have been received well. Product pipeline remains robust with multiple new launches expected, going ahead, across 125-cc segment, premium motorcycles, scooters and EVs.
HMCL is also upgrading customer experience by digitalising buying journey and plans to open 500-plus ‘Hero 2.0’ stores and over 100 exclusive premium stores. Near-term focus will also be on scaling-up EVs through network and product expansion. Richer product mix, accelerated growth in spares revenue, higher localisation, operating leverage and softening raw materials are the key levers for profitable growth, going forward.
Positive operating leverage and softening commodity prices will also support margin recovery. HMCL holds 35 per cent stake in Ather and will continue to support the company. HMCL has also collaborated with Zero Motorcycles for developing high-end electric motorcycles. The management indicated that it remains open to any inorganic opportunities/collaborations that will help accelerate its EV journey.
Maintain Buy with an unchanged March 2024 TP of ₹3,200. Recovery in rural demand will be a key monitorable.