Hero MotoCorp Q2 Results Review - Inline; Launch Pipeline Remains Strong: Prabhudas Lilladher

Prabhudas Lilladher Report

Hero MotoCorp Ltd. Ebitda margin increased by ~40 basis points QoQ, led by lower raw material (-80 bp) and employee expenses (-50 bps) which was partially offset by higher other expenses (-90 bps).

Hero MotoCorp is seeing recovery in the rural market and is aiming to grow ahead of the industry on back of aggressive model launch and good start to festive season.

The company is confident of continuing the growth momentum post festive season and we concur given low base. The EV two-wheeler 'Vida' is on track to reach to 100 cities by CY23, followed by capacity expansion and product portfolio in FY25.

Moreover, good demand is expected in premium bikes, Karizma and X440 with 10,000 monthly production capacity. We expect margins to improve in the near term from operating leverage, premiumisation, cost controls and stable commodity costs (we build in ~210 bps increase over FY23-26E).

Key monitorables will be-

1. performance of new launches,

2. uptick in EV volumes,

3. competition in core segments and

4. recovery in rural markets.

Maintain ‘Accumulate’ at target price of Rs 3,575 (at 16 times on Sep-25E standalone earnings per share, Rs 83 for Fincorp and Rs 78 for Ather).

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