Hero MotoCorp Q2 Results Review - EV, Premium ICE Acceleration In Focus: Yes Securities

Yes Securities Report

Hero MotoCorp Ltd.’s Q2 FY24 results were in-line with our/street estimates as Ebitda margins expanded 260 basis points YoY (+30 bp QoQ) at 14.1% (ICE margins at ~15% versus 14.5% QoQ), supported by higher spare sales at Rs 13.5 billion (versus Rs 12.2 billion in Q1).

While gross margins were in line at 31.4% (+340 bp YoY/ +80 bp QoQ), the same was partially offset by higher other expense (+11% QoQ) due to new product launch expenses.

The management indicated festive demand growth (first 17days of festive) was at double-digit for industry (where Hero MotoCorp grew ~15%, is in-line with expectations. Going ahead while the management remain hopeful of broad-based volumes recovery within two-wheelers, the company is aiming at market share expansion led by new product launches.

Further the focus will be on demand fulfilment of Harley X440 and Karizma as have indicated ramp-up in production capacities (~10,000 units per month) for the same.

EV ramp-up is targeted with ~100 cities before December 2023 and the production capacity ramped-up to ~10,000 units per week since past two weeks.

The outcome of changes at the leadership remains (such as overall market share gains, improved positioning in scooters/exports and overall premiumization) key to watch for ahead as it would be the key catalyst for further rerating over FY24-25E.

Maintain 'Add' with target price of Rs 3,563 (unchanged) based on ~15 times March 2025 standalone EPS plus Rs 109 for Hero FinCorp.

We have not changed FY24E/25E EPS as we expect the profitability momentum to continue. Management’s action to overhaul brand strategy supported by Ather’s continued brand acceptance provide and additional lever for the stock.

We build in revenue/Ebitda/adjusted profit after tax compound annual growth rate of 17.8%/27.8%/25.7% over FY23-25E.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.