Hero MotoCorp surges 4%, nears 52-week high on healthy sales in May

Shares of Hero MotoCorp (HMCL) surged 4 per cent to Rs 2,911.65 on the BSE in Friday’s intra-day trade after the market leader reported volume growth of 31.1 per cent month-on-month (MoM) at 519,474 units in the month of May 2023. The company reported a growth of 7 per cent over the corresponding month of May 2022, when the company had sold 486,704 units.

The stock of two-wheelers company was trading close to its 52-week high of Rs 2,939.35, touched on August 18, 2022. In past one month, the stock has rallied 16 per cent, as compared to 2.1 per cent rise in the S&P BSE Sensex.

According to ICICI Securities, in the 2-wheeler space volume prints were in line with their expectation tracking healthy retails, with HMCL surprising positively with double digit growth and reaching new highs in recent past.

HMCL said the momentum is expected to continue in the coming months, driven by an uptick in customer sentiments, forecast of normal monsoon and a host of new launches in the premium segment.

In line with its plan for global business expansion, the company announced Motosport SA as its partner in Costa Rica – a key market in Central America. As the exclusive distributor for the sale and service of Hero MotoCorp, Motosport SA will play a key role in the rapid expansion of Hero’s network in Costa Rica, the company said.

Meanwhile, in March quarter earnings call, double-digit 2W industry revenue growth guided for FY24, on the back of improving macros and pent-up/replacement demand; demand in Rural is seen to improve now, and is maintaining momentum over Apr-May, which is typically a wedding season.

HMCL has been gaining retail market share and has planned aggressive product actions, incl. the 125cc category, for further improvement (highest-ever launches in a single year); this year would see a new launch each quarter. Actions have been planned across the product range, from the Passion Plus re-launch to the Harley-branded product at the premium end, said analysts at Emkay Global Financial Services in result update. The brokerage further said the worst of the commodity inflation is behind; HMCL retained its longer-term margin guidance of 14-16 per cent.

Technical View
Bias: Positive
Target: Rs 3,250
Support: Rs 2,750
Resistance: Rs 2,980
 
Hero MotoCorp has seen a steady rise, with the stock gaining as much as 29.7 per cent from its March end low of Rs 2,246 in just over two months. The stock is currently trading above the higher-end of the Bollinger Bands, both, on the daily and the weekly charts. The same suggests that the bias is likely to favour the bulls, as long as the stock sustains above Rs 2,850.
 
On the upside, the stock could target the higher-end of the Bollinger Band on the monthly chart - Rs 2,980. A breakout above the same can trigger a sharp rally towards the monthly trend line resistance, indicating a target of Rs 3,250.

 
In the near-term, in case, the support of Rs 2,850 gets violated the stock could dip to Rs 2,750.
 
(With inputs from Rex Cano)