Hero MotoCorp Receives Morgan Stanley Upgrade On GST-Led Recovery, Attractive Core Valuations

Morgan Stanley has turned more positive on Hero MotoCorp Ltd., upgrading the stock to an 'overweight' rating as supportive valuations and signs of a market-share trough begin to emerge. The firm has upped its price target on the counter to Rs 6,471 apiece, marking a 17% upside.

The brokerage says Hero MotoCorp's market share declines have paused, with gains now visible in scooters, EVs and the premium bike segment. A better product mix and lower EV losses are expected to aid margins.

It notes that GST-led price cuts are helping revive the entry-level segment, while new launches such as the HF Deluxe Pro supported volume growth during the festive period, where HMCL reported 17% overall volume growth and a rise in first-time buyers. The company is also gaining share in scooters and in premium bikes. Morgan Stanley expects scooter contribution to domestic volumes to rise from 7% to 11% in the next two fiscals.

Margins are improving with higher exports and an upgraded domestic mix driving a 5% YoY increase in average selling price in the first half of the current fiscal. As EV losses narrow, Morgan Stanley has raised its Ebitda margin estimate from 14.6% to 15.3%, assuming EV breakeven conservatively.

Excluding Finco and subsidiaries like Ather, HMCL trades at a 16.8 times price to earnings ratio, versus 23 times for Bajaj and 32.6 times for TVS, making the core business look attractive. The brokerage continues to value the stock at a 10% premium to its 10-year median, rolling its valuation to Dec-27 EPS.

Morgan Stanley flags the implementation of ABS norms in Jan 2026 as a downside risk but assumes, given capacity constraints, that implementation will likely shift into 2027.

Shares of Hero MotoCorp are currently trading 4.05% higher at Rs 5,763 apiece, as compared to a 0.17% uptick in the benchmark Nifty 50.