Hero MotoCorp Reverses Gains In Volatile Session Even As Jefferies Upgrades Stock

Shares of Hero MotoCorp Ltd. rose intraday before reversing gains in a volatile session even as Jefferies upgraded India's biggest two-wheeler maker.

The research house upgraded the stock to ‘buy' from ‘hold', with a target price of Rs 3,000 that implies a potential upside of 13.37%, according to its report.

The automaker launched its first electric scooter under the Vida brand on Friday.

Shares of Hero MotoCorp gained as much as 3.3% in early trade on Friday. The stock closed with 0.8% losses, near the day's low. The stock's trading volume was 1.6 times the 30-day average, when markets closed on Friday.

Of the 50 analysts tracking the company, 34 maintain a ‘buy', 10 suggest a ‘hold' and six recommend a ‘sell', according to Bloomberg data. The average of the 12-month target price implies an upside of 13.9%.

On Thursday, Prabhudas Lilladher and Motilal Oswal reiterated their ‘buy' ratings on Hero MotoCorp, while Systematix Group retained ‘hold'.

Jefferies said India's auto demand is recovering from its worst slowdown in decades and expects a 17-19% volume CAGR for passenger vehicles, two-wheelers and trucks over FY22-25. Falling metal prices, it said, could aid margin.

Jefferies identified TVS Motor Co. Ltd., Maruti Suzuki India Ltd., Eicher Motors Ltd. and Tata Motors Ltd. as its preferred picks from the sector.

Systematix Group, in its note, said demand scenario for commercial and passenger vehicles remained robust as supply constraints eased. Two-wheeler demand, it said, is consolidating with scooters and premium motorcycles seeing early signs of recovery. Correction in commodity costs would likely aid margin.

According to Motilal Oswal, the festive season is critical for two-wheelers and tractors and preferred Hero MotoCorp as a pure-play on demand recovery in domestic two-wheeler space.

Prabhudas Lilladher expects Hero MotoCorp to clock a revenue growth of 5% sequentially owing to 3% increase in volume. It also anticipates Ebitda margin to improve due to easing of raw material costs and price hikes.