Hero MotoCorp up 3%, at record high on positive outlook; zooms 95% in 1 yr

Hero MotoCorp stands to gain with rural growth expected to drive up demand in the two-wheeler market, particularly in the commuter segment.

Shares of Hero MotoCorp (HMCL) hit a record high of Rs 5,970, after its shares rallied 3 per cent on the BSE in Tuesday’s intra-day trade amid heavy volumes.

The stock of the company gained on the back of a positive outlook, as the company has seen favourable trends across its domestic, electric vehicle (EV) and global businesses, in the last quarter. 

Going forward, HMCL anticipates increased momentum in the October to December 2024 quarter due to positive customer sentiment, a favourable monsoon and the upcoming festive season. Additionally, the company is expected to launch products in internal combustion engine (ICE) as well as EV categories. 

The stock of the two-wheeler (2W) maker has surpassed its previous high of Rs 5,894.30 that it touched on June 18, 2024. In the past one month, HMCL has outperformed the market by surging 16.5 per cent, as compared to the 3 per cent rise in the BSE Sensex.

In the past one year, it has zoomed 95 per cent, compared to the 23 per cent surge in the benchmark index.

HMCL is India’s leading two-wheelers manufacturer, with a nearly 32 per cent share of the domestic motorcycle market in volume terms. The company has eight manufacturing facilities, including six in India and one each in Colombia and Bangladesh.

That apart, with the company receiving a positive response to Xtreme 125cc, Hero has increased the manufacturing capacity of the model to 40,000 units every month, from 25,000 units per month, to fulfill demand and increase its market share, brokerage firm Geojit Financial Services said in its June quarter result update. 

HMCL is further expected to introduce more motorcycles in FY25, focusing on growing its premium portfolio, as well as new launches in both ICE and EV scooters. HMCL is actively engaged in the development of scooters, with a focus on Destini, which is expected to be unveiled soon, it added.

The company's management indicated improved first-time buyers in the rural segment. They said that improving vehicle finance, lower down payments and expanded distribution reach will be key ingredients to accelerate rural market growth, as HMCL already has a wide range of entry-level bikes.

In EVs, HMCL plans to revamp its portfolio with the latest technology in the coming months, which will be eligible for the production-linked incentive (PLI) scheme benefits, said analysts at InCred Equities.

Two-wheelers are a better tactical play for festive demand revival. With rural market demand improving, the brokerage firm feels the high-teen growth for the domestic 2W segment and HMCL is possible, aided by a better rural mix and new 125cc bike launch.

Meanwhile, HMCL, in its FY24 annual report, said the Indian 2W industry has continued its progress on the U-shaped recovery and is inching closer to the pre-pandemic level with back-to-back double-digit growth. The industry forecast has stayed upbeat in terms of both short- and long-term outlooks.

With India’s rural economy poised for robust growth, propelled by the government’s emphasis on boosting agricultural and non-agricultural incomes, rural growth is expected to drive up demand in the two-wheeler market, particularly in the commuter segment.

Hero MotoCorp, with its extensive portfolio and deeply-penetrated networks in rural India, is well-positioned to capitalise on this growing demand, the company said.

Strong economic momentum, rising income levels, rapid urbanisation and greater access to affordable financing options, have fuelled a consistent demand for two-wheelers in India. This demand is further amplified by the need for practical commuting solutions and a growing interest in the premium segment.

With only around 49.7 per cent of Indian households currently owning a two-wheeler, the sector presents a significant growth opportunity, HMCL said.