Hero MotoCorp Q2 Review - Exports Compensate Weak Domestic Demand: Prabhudas Lilladher

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Prabhudas Lilladher Report

Hero MotoCorp Ltd.'s Q2 FY22 Ebitda margin surprised positively at 12.6% and came in above our estimate of 11.3% aided by improved product mix, higher exports (up 160% YoY in H1), multiple price hikes over the year (~Rs 3,000) and cost savings led by leap program (up 320 basis points YoY).

Festive season sales were subdued due to delayed monsoons and weak rural sentiments compared to urban markets.

We believe Hero MotoCorp will benefit in medium to long-term with:

1. focus on increasing export penetration,

2. improvement in rural sentiments driving demand for entry segment models and

3. further savings to be achieved through cost savings program.

However, success in electric vehicles remains main concern for Hero MotoCorp and a key factor to monitor. The company is one amongst front runners in EV race through its investment in Ather.

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