Hero MotoCorp Ltd., established in 1984 through a technological collaboration with Japan’s Honda, has evolved from its origins as Hero Cycles into India’s premier motorcycle manufacturer. Over the past two decades, the company has maintained its position as the world’s largest two-wheeler manufacturer in terms of unit volumes sold annually.
The severe fall in stock prices have brought it to a mid-cap category stock : A STRONG MID-CAP then you can argue ! It is trading at a potential turning point as well.
Despite its historical success, Hero MotoCorp has faced challenges in recent years. Interestingly, over the past decade, the company’s stock price has increased by only about 50%, while the Sensex has risen by approximately 200%. This underperformance is attributed to a modest 70% growth in profits and a 50% increase in revenue during the same period. Even though 2024 was great for the Hero moto stock price, where it almost doubled from 3000 to 6000+, but poor performance has plagued the stock prices again by almost 30% from its peak. Technically, stocks seems to have strong support ~ 3700-3800 zone, followed by 3300 – 3000 area in monthly charts.
The stock may form a base around 3700 – 4000 zone, with time correction as well, before charging.
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Recent Performance and Management View
Analysts suggest that Hero MotoCorp’s slow response to technological advancements and shifting market preferences within the two-wheeler industry has contributed to its challenges. The company’s strong reliance on entry-level motorcycles, particularly in rural areas, left it vulnerable as urban consumers began favouring more premium and technologically advanced bikes. Additionally, Hero MotoCorp has struggled to make significant inroads into the growing EV and scooter segments, which have eroded a portion of its traditional market share.
In response, Hero MotoCorp has initiated strategies to regain its market position. The company recently reported its highest-ever quarterly revenue of ₹102.6 billion, reflecting an ~4.8% year-on-year growth. Earnings before interest, taxes, depreciation, and amortization (EBITDA) reached ₹15.07 billion, a 9% increase, while net profit stood at ₹11.07 billion, a 2% rise.
The company is focusing on growth through significant investments in brand building and new product launches. Earlier in 2024, Hero MotoCorp entered the mid-size roadster segment with the launch of the Mavrick 440 motorcycle, developed in collaboration with Harley-Davidson. Plans are underway to upgrade existing showrooms to enhance the premium customer experience, and several new models in the EV scooter segment are expected to be introduced.
Furthermore, Hero MotoCorp aims to leverage its partnerships with Harley-Davidson and U.S.-based EV manufacturer Zero Motorcycles to expand its global presence. Currently operating in 50 markets, the company plans to extend its reach further.
Competitively the stock seems to be placed better on valuation and also has better Brand Recall/Value than its peers.
In the electric vehicle (EV) sector, Hero MotoCorp holds a 39.7% stake in Ather Energy, an innovative electric scooter manufacturer. This strategic investment positions Hero MotoCorp to benefit from Ather Energy’s anticipated initial public offering (IPO). In a recent transaction, Hero MotoCorp acquired an additional 2.2% stake in Ather Energy for ₹1.3 billion, valuing Ather at approximately ₹56.4 billion and Hero’s total stake at ₹22.4 billion.
In summary, while Hero MotoCorp has encountered challenges due to evolving market dynamics and technological shifts, its strategic initiatives and solid financial foundation position it well for future growth. Investors may find the stock appealing from a medium-term risk-reward perspective.
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