With the Indian market in a bull run, investors might want to keep a tab on potentially outperforming stocks, especially in those sectors which are trading at all-time highs. One such sector is Auto and one of the key players in this industry is Hero MotoCorp Limited (NS:HROM).
It is a two-wheeler manufacturer with a market capitalization of INR 57,929 crores and trades at a P/E ratio of 20.62 which is lesser than Bajaj Auto (NS:BAJA) and TVS Motor Company's (NS:TVSM) PE of 21.53 & 47.14, respectively. So, there’s clearly a value advantage for Hero MotoCorp.
The scale of operations of the company can be gauged by the fact, that it has a presence in over 43 countries and reached a 100 million-unit (cumulative production) milestone in 2021. It also has the largest distribution network with over 6,000 dealers and network partners and 1,300 authorized service centres. It is now stressing on new-age shopping experience by providing a 360-degree view of products on its websites, revamping e-stores and Premia stores.
The main reason for being bullish on this counter is that it has now forayed into the premium 400cc segment with a partnership with one of the top-class motorcycle brands in the world - Harley-Davidson. The premium motorcycle segment is rapidly growing in India and with Harley-Davidson, it has launched a co-developed Harley Davidson X440, the first of a kind by the Duo in India and the most affordable by Harley-Davidson.
More importantly, the pricing of the product is killer, starting at INR 2,29,000, making it a direct rival of Eicher Motors (NS:EICH) brand Royal Enfield (RE). RE is quite a dominant player in cruiser-type bikes in India and has its own fan following, but Harley-Davidson’s cult is on another level. The main reason the latter was losing its market dominance in India in recent years was primarily due to its pricing strategy. But now getting a cult brand such as a Harley under INR 2,30,000 and that too a good 440cc powerful bike could be game-changing for Hero MotoCorp. A 5% cut in Eicher Motors' shares in today's session is showing the upcoming intense competition.
On the technical front, there is some resistance between INR 2,900 - INR 3,000 and the stock is inside this range, at INR 2,977. Once the level of INR 3,000 gets breached, a level of INR 3,600 might not be a difficult task for the stock, if investors can give it a few months. The icing on the cake is, the stock is trading at a good dividend yield of 3.45%.
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