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Hero MotoCorp is the top Nifty 50 gainer after Q4 results, analysts expect nearly 25% more rally
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Hero MotoCorp shares have in the past year increased investors’ wealth by 86% as against the benchmark Nifty 50 which has risen 22% during the period. It has also outperformed the sectoral index Nifty Auto which has gone up 66% in the one-year period.
Hero MotoCorp shares rallied nearly 6% in early trade on May 9, a day after the two-wheeler maker reported its results for the January to March 2024 quarter. The two-wheeler maker’s stock became the top Nifty 50 following Q4 results, which were largely in line with CNBC-TV18 poll projections.
Hero MotoCorp shares trade 5.8% higher at ₹4,881.35 on NSE at 9:49 am. In the past year, the stock increased investors’ wealth by 86% as against the benchmark Nifty 50 which has risen 22% during the period. It has also outperformed the sectoral index Nifty Auto which has gone up 66% in the one-year period.
Analysts expect further upside in the stock as the company’s management has guided for double-digit revenue growth in the current fiscal.
| Brokerage | Rating | Target price |
| Jefferies | Buy | 5650 |
| CLSA | Outperform | 5280 |
| Motilal Oswal | Buy | 5320 |
Global brokerage Jefferies has a buy call on the stock with a target price of ₹5,650, implying a potential upside of more than 23%. It said it continues to like the company and it believes the two-wheeler segment is poised for double-digit growth over the next three years.
The brokerage, however, noted that Hero MotoCorp’s market share has declined in the segment and that adverse demand profile shifts are concerns.
According to the analyst, if there is any success in premium bikes, scooters and electric vehicles (EVs) can enhance growth. It sees a 17% earnings per share (EPS) compound annual growth rate (CAGR) over FY24-26.
CLSA, meanwhile, pointed out that a reduction in raw material costs led to an 89 basis points improvement in gross margin quarter-on-quarter.
It explained that the EBITDA margin for the petrol two-wheeler segment stood at 15.6% whereas the EV business dragged the margin down by 130 bps in Q4.
Also Read: Hero MotoCorp to launch Xoom 125 cc and Xoom 160 cc scooters ahead of festive season
Motilal Oswal, meanwhile has set the target price at ₹5,320, indicating a potential upside of 15%. It also highlighted management’s commentary that despite fewer wedding dates in May-June 2024, overall sentiment remains positive across rural and urban areas.
For the premium segment, the two-wheeler maker aims to increase the capacity to 10,000 units per month for the 440CC platform and Karizma put together in the next couple of months, it said.
EV scooter model launches such as Xoom 125CC and 160CC are scheduled for 1HFY25. The management believes that most of the white spaces would be filled after these launches, it added.
Thursday’s share price gains come after Hero MotoCorp reported an over 18% jump in net profit on a year-on-year (YoY) basis to ₹1,016 crore in the January-March quarter. Its revenue surged 14.6% in Q4FY24 to ₹9,519.3 crore, beating poll estimates.
Hero MotoCorp’s earnings before interest, taxes, depreciation, and amortization or EBIDTA margin for the quarter came in at 14.3%, reflecting an improvement of 130 bps on a YoY basis, driven by product mix, lower commodity costs, higher savings, and judicious price increases, the firm said.
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