Target: ₹5,796
CMP: ₹4,874.15
We expect Hero Motocorp Ltd (Hero) to deliver a volume growth of 7/6 per cent during FY25E/26E, driven by new launches in the 125cc, scooters, and premium segments and a ramp-up in exports.
It is ramping up the capacity for Xtreme 125R and its premium products, which would help drive growth in these segments. It targets to launch two new scooters in 125cc and 150cc segments in the coming quarters. The company will also benefit from a gradual rural recovery, given the strong brand equity in the economy and executive segments.
We would monitor Hero’s roadmap in the EV product portfolio, including investments in Ather, the ramp-up of Vida, and the launch of a new affordable product range over the next few quarters; Strategy in the mid-weight MC segment amidst growing competition; and expansion into new international markets.
Additionally, normal monsoons, government initiatives to enhance rural income, and the marriage season are anticipated to drive 2W industry growth, benefiting Hero, particularly in the entry and 125cc segments. Consequently, 9/10/11 per cent CAGR in Revenue/EBITDA/PAT over FY24-26 is estimated.
The stock has corrected by over 22 per cent from its 52-week high observed in September 2024, which we believe makes the stock very attractive from current levels considering its business strength and value.
