Hero MotoCorp (NS:HROM), India’s two-wheeler giant, has presented a mixed bag for investors recently. The stock has faced a decline of 7.6% over the last month. The company’s Q2 FY24 results brought some cheer, with shares surging over 4.7% to INR 4,820 on the NSE after reporting a 14% year-on-year (YoY) growth in standalone net profit, reaching INR 1,204 crore. Hero MotoCorp also recorded an 11% YoY rise in revenue from operations, amounting to INR 10,463 crore.
Operational Strength and Margins
EBITDA grew by 14% YoY to INR 1,516 crore, with margins improving by 40 basis points to 14.5%. This indicates Hero MotoCorp’s effective cost management and operational efficiency. Volume growth was a standout, with 15.2 lakh units sold in Q2, compared to 14.16 lakh units last year, and the festive season brought record retail sales of 16 lakh units.
The first half of FY24 saw revenue rise by 13% YoY to INR 20,607 crore, while Profit After Tax (PAT) increased by 24% YoY to INR 2,326 crore, underlining the company’s solid financial footing.
Diversified Revenue Streams
Hero MotoCorp achieved its highest-ever quarterly revenue of INR 1,456 crore from its parts, accessories, and merchandising segment. This diversification beyond vehicles underscores its commitment to strengthening revenue streams.
Brokerage Views
Jefferies has maintained its "Buy" rating on Hero MotoCorp, albeit with a revised target price of INR 5,500. It highlighted the company’s operational efficiency, with EBITDA per vehicle reaching a new high. However, Jefferies expressed concerns over Hero’s declining market share and shifting demand profiles but noted that success in premium bikes and electric vehicles (EVs) could be a game-changer.
Nomura echoed a bullish sentiment, retaining its "Buy" call with a target price of INR 5,805. It pointed to the company’s strong rural market presence (54% share) and early signs of rural recovery as catalysts. Nomura expects the two-wheeler market to grow by 10% over FY25-26, supported by favorable monsoons and balanced growth.
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