Hero MotoCorp gains 3% on resumption of production at all facilities

A healthy monsoon and harvest season along with a rebound in GDP should aid the industry's recovery from Q2 onwards, Hero MotoCorp management said

Shares of Hero MotoCorp (HMCL) were up 3 per cent at Rs 2,961.75 on the BSE in intra-day trade on Monday after the company resumed production at all its facilities from today.

Hero MotoCorp - the world’s largest manufacturer of motorcycles and scooters – on Saturday said that the company is gearing up towards a gradual resumption of operations by starting production at all its manufacturing plants in India from Monday, May 24th.

The company had already commenced single shift production at three of its plants – Gurugram and Dharuhera in Haryana and at Haridwar in the northern hill state of Uttarakhand – from Monday, May 17. The other plants of Hero MotoCorp in India – Neemrana in Rajasthan, Halol in Gujarat and Chittoor in Andhra Pradesh - will also start single shift operations from May 24th. The Global Parts Centre (GPC) at Neemrana will also be operational from May 24th, it said.

HMCL further said in addition to producing for the domestic market in India, these plants will also have an enhanced focus on catering to the Global Business (GB) markets across the world. The company continues to monitor the situation closely and will move to double-shift production gradually, it said.

At 11:32 am, HMCL, the top gainer among the S&P BSE Auto index, was up 2 per cent at Rs 2,949 on the BSE. In comparison, the S&P BSE Auto index and the S&P BSE Sensex were up 0.65 per cent and 0.40 per cent, respectively.

Despite today’s outperformance, HMCL has underperformed the market lately, by falling 14 per cent in the past three months as against a marginal 0.04 per cent decline in the S&P BSE Sensex. In the past one year, it has gained 37 per cent as compared to a 65 per cent rally in the benchmark index.

While announcing its March quarter results on May 6, the management had said that going forward, we continue to remain cautiously optimistic on the demand for personal mobility despite the challenging circumstances. The company’s electric vehicle (EV) journey has further been augmented with its recent partnership with Gogoro, the developer of the world’s largest battery-swapping network.

The management further said a healthy monsoon and harvest season and a rebound in GDP should aid the industry’s recovery from Q2 onwards. The company also expects significant growth in its global business with a renewed thrust on developing key overseas markets.

According to analysts at Emkay Global Financial Services, near-term demand may remain subdued due to pandemic-related restrictions. However, the brokerage firm expects recovery from Q2FY22 onwards. HMCL remains a beneficiary of this uptrend, and we expect revenue/earnings CAGRs of 13 per cent/16 per cent over FY21-24E, the brokerage firm said in the March quarter results update.