Hero MotoCorp stock new records; tops Rs 5,000 mark, m-cap reaches Rs 1 trn

In the past one week, Hero MotoCorp has outperformed the market by surging 13%, against near 1% decline on the Sensex, after the company reported a stellar performance for the March quarter.

Shares of Hero MotoCorp crossed the Rs 5,000-mark for the first-time ever in Tuesday's intraday deals. Hero MotoCorp stock hti a new high at Rs 5,044, as it rallied 3 per cent on the BSE on healthy outlook. The stock of two-wheeler manufacturer surpassed its previous high of Rs 4,979.95 registered on February 12, 2024.

In past one week, Hero MotoCorp stock has outperformed the market by surging 13 per cent after the two-wheeler major reported a stellar performance for the quarter ended March 2024 (Q4FY24). In comparison, the S&P BSE Sensex was down nearly 1 per cent during the period.

A sharp rally in stock price of Hero MotoCorp has seen its market capitalisation (m-cap) touch the Rs 1 trillion mark for the first-time. Hero MotoCorp's m-cap hit Rs 1.01 trillion in intra-day trades, the BSE data shows.

Hero MotoCorp is the world’s largest 2-W manufacturer by volume, with domestic market share at 30.2 per cent as of FY24. Its suite of popular models includes Splendor, Passion, Glamour, etc. Scooter market share at 6.9 per cent and motorcycle market share was at 43.1 per cent as of FY24.

The company’s presence is in EV space through its captive offerings under Vida brand as well as through investments in Ather Energy, Gogoro & Zero Motorcycles.

In Q4FY24, the consolidated net profit of Hero MotoCorp rose by 16.4 per cent year-on-year (YoY) to Rs 943.46 crore due to price hikes, stable commodity prices, successful product launches, and an overall rise in demand for two-wheelers in the country. Revenue grew 14.6 per cent YoY at Rs 95,193 crore.

Earnings before interest, taxes, depreciation and amortization (EBITDA) margins was up 130 bps YoY to 14.3 per cent, driven by product mix and moderation in commodity cost.

With commodity prices remaining stable, expectations of normal monsoons, and government spending expected to increase, the management sees multiple tailwinds for the sector over the upcoming quarters. Management expects Hero to deliver double-digit revenue growth in FY25. Xtreme 125R capacity is expected to increase to 1,000 units per day by July 2024.

With increasing focus towards improving market share in premium motorcycle segment, Hero MotoCorp has introduced new products on the likes of Mavrick 440, Karizma, and H-D X440 in >200cc segment & Xtreme 125 in high growing 125cc segment. It now broadly has requisite products in all sub segments & is augmenting capacities in this space for healthy growth that lies ahead, according to analysts at ICICI Securities.

Hero MotoCorp has a capital efficient business model with cash rich balance sheet. With focus on premiumisation and Electrification, it now has the right product slate to grow ahead of the industry, the brokerage firm said with ‘buy’ rating on Hero MotoCorp and target price of Rs 5,600 per share.

While the stock has done well recently on an absolute basis, its relative performance vs. 2W peers is still lagging. With rural demand tailwind expected in FY25F for the 2W industry, Hero MotoCorp is best placed to encash it and reverse the market share erosion, analysts at InCred Equities.

Management action, in the form of new product launch success yielding market share gain, is still awaited. Downside risk is any delay in rainfall or uneven rainfall impacting rural demand. Upside risk is a stronger-than-expected 2W demand recovery, the brokerage firm said.