Hero MotoCorp Shares Continue To Slump — Why This Analyst Remains Bullish Anyway

HDFC Securities noted that Hero MotoCorp's 3.6% YoY rise in standalone net profit at ₹711 crore this quarter was in line with its estimates.

The Hero MotoCorp Analyst: The analyst team at HDFC Securities led by Aniket Mhatre maintained their buy rating for the stock but downgraded the target price to ₹2,959 from ₹3,086.

The Hero MotoCorp Thesis: The brokerage firm noted that the company's EBITDA margin at 11.5% remained stable quarter-over-quarter,  as the loss in sales volume was mitigated by benefits from softening input costs.

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In the latest research note, HDFC Securities highlighted that the company's management is hopeful of the revival of demand in rural areas and "expects the 2W industry to post double-digit revenue growth in FY24."

The note further said that the company would look to outperform industry growth and recover back lost market share on the back of a healthy launch pipeline. The company had revealed its target of launching one new model each quarter from here on in scooters and 125cc and above motorcycles.

However, the brokerage firm lowered its earning estimates for the company by 1-6% over FY23-25E given "a lower-than-expected demand in Q3 and sustained weakness in Q4."

Price Action: Shares of Hero MotoCorp were down 2.08% to trade at ₹2,559.40 in the late hours of trading on Thursday.

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