EQWIRES RESEARCH ANALYST
Exchange: NSE | Sector: Automobiles – Two-Wheelers
Report Date: November 05, 2024
1. Executive Summary
Hero MotoCorp Limited (HEROMOTOCO) is the largest two-wheeler manufacturer in the world, with an unparalleled dominance in the Indian market. With a strategic push into electric vehicles (EVs) through its Vida brand and continued strength in commuter motorcycles, the company is well-positioned for future growth. This report delves into Hero MotoCorp’s financial performance, industry trends, valuation, and technical analysis, providing actionable insights for investors.
Investment Rating: BUY
Target Price: ₹5,030
Current Market Price (CMP): ₹4,835
Stop Loss: ₹4,720
2. Company Overview
Hero MotoCorp was established in 1984 and has grown into the most recognized two-wheeler brand globally. Known for affordability and fuel efficiency, Hero’s models like Splendor, HF Deluxe, and Passion dominate India’s mass-market segment. The company is also making strides in the electric vehicle market, signaling its adaptability to evolving industry trends.
Key Statistics:
Market Share: ~35% in India (Two-wheelers)
Installed Capacity: Over 11 million units annually
Global Reach: 40+ countries across Asia, Africa, and South America
EV Segment: Launched Vida V1 series, with plans to expand product offerings by 2025
3. Financial Performance
Q2 FY2024 Highlights:
Metric Q2 FY2024 YoY Growth QoQ Growth
Revenue ₹9,950 Cr +7% +4%
Net Profit ₹1,015 Cr +5% +2%
EBITDA Margin 12.5% +40 bps Flat
Earnings Per Share ₹50.4 +6% +3%
Hero MotoCorp’s profitability has remained stable despite headwinds like rising input costs. The company’s focus on cost efficiency and product mix optimization has supported margin expansion.
4. Industry Overview
4.1. Indian Two-Wheeler Market:
India is the world’s largest two-wheeler market, driven by affordability, rural penetration, and convenience in congested urban areas. The market is transitioning rapidly toward electric two-wheelers due to government incentives under FAME-II and rising fuel costs.
4.2. Electric Vehicle (EV) Opportunity:
Hero has committed significant resources to EV development, competing with players like Bajaj, TVS, and startups like Ola Electric. Its Vida brand targets urban commuters and eco-conscious consumers.
4.3. Macro Trends:
Urbanization and Income Growth: Boost demand for premium two-wheelers.
Government Push for Electrification: Incentives and infrastructure support the EV ecosystem.
Commodity Cost Trends: Steel and aluminum prices are stabilizing, aiding margin recovery.
5. Key Strengths
5.1. Market Leadership:
Hero’s iconic brands dominate entry-level motorcycles, a segment that accounts for 50% of two-wheeler sales in India.
5.2. Strong Financials:
Hero’s low debt levels (D/E: 0.03) and robust cash reserves position it well for future growth.
5.3. Rural Penetration:
Over 60% of Hero’s sales come from rural areas, where its affordable and reliable products are trusted.
5.4. Electric Vehicle Strategy:
Hero’s EV launch under the Vida series is gaining traction. The company plans significant capacity expansions and R&D investments in the EV space.
6. Risks
6.1. Rising Competition:
Startups like Ola Electric and Ather Energy, along with incumbents like Bajaj and TVS, are increasing competition in the EV segment.
6.2. Dependence on Domestic Market:
Over 90% of sales are from India, making Hero vulnerable to local economic shocks.
6.3. Commodity Price Volatility:
Rising costs of steel, aluminum, and rubber could pressure margins.
7. Valuation
Metric HEROMOTOCO Peers Avg.
P/E Ratio 23 45
EV/EBITDA 14.7x 14.9x
Dividend Yield 4.0% 2.8%
ROE 22% 18%
Hero is attractively valued compared to peers, with a strong dividend yield and healthy ROE.
8. Technical Analysis
1-Year Chart:
Below is the 1-year price chart of HEROMOTOCO.
Key Observations:
Stock trade on a support level
Support Levels: 4675-4740 Support zone.
Resistance Levels: 5060-5150 Resistance zone.
Indicators: RSI at 30, near oversold zone.
9. Strategic Initiatives
EV Expansion: Hero is setting up EV-specific plants and plans to launch 5 new models by 2026.
Export Growth: Aggressive expansion in Africa and Latin America to reduce domestic dependency.
Tech Partnerships: Collaborations with Gogoro for battery swapping technology.
10. Chart
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