Hero MotoCorp surges 5%, hits over 7-month high as June sales jump 4x MoM

The two-wheeler bellwether reported wholesale dispatches for the month of June at 4.5 lakh units, up from 1.12 lakh units sold in May.

Shares of Hero MotoCorp hit an over seven-month high of Rs 2,671, surging 5 per cent, on the BSE on Thursday on expectation that two-wheeler demand could recover in the next few months. The stock was trading at its highest level since November 8, 2019.

The two-wheeler bellwether on Wednesday posted a 27 per cent year-on-year decline in wholesale dispatches for June at 4.5 lakh units. The company’s volumes jumped four-fold on a sequential basis from 112,692 units in May.

The company said that much of the demand is being supported by rural and semi urban areas. While wholesale dispatches are at around 90 per cent of pre Covid levels, retail volumes are at 60 per cent of pre-Covid levels currently, it said.

"A major part of the market demand is emanating from the rural and semi-urban markets which have been helped, to a large extent, by the various stimulus packages rolled out by the government," the management said.

A combination of multiple factors, including the forecast of a normal monsoon, a bumper Rabi crop and the upcoming festive season are expected to keep the momentum going over the next few months, it said.

Sales in the first quarter of FY’21, however, was subdued due to the impact of Covid-19 and the effects of the closure of the plant operations and the retail outlets through the entire month of April and most of May. Despite the challenging conditions, Hero MotoCorp sold a total of 563,426 units of motorcycles and scooters in the first quarter of financial year (April-June) 2020-21.

According to market experts, outlook for FY21 is uncertain. "A gradual ramp-up is expected in volumes. Pent-up demand, marriage season (for states in Hindi-speaking belt) demand, and rural demand is expected to support volumes. Rural demand expected to outpace urban demand," said analysts at Emkay Global in a sector report.

In the past three months, the stock of Hero MotoCorp has outperformed the market by surging 63 per cent, as compared to 27 per cent rise in the S&P BSE Sensex.