Buy Hero MotoCorp, target price Rs 5,285: Axis Securities

Axis Securities has a buy call on Hero MotoCorp with a target price of Rs 5,285. The current market price of Hero MotoCorp is Rs 3,690. Hero, incorporated in 1984, is a Large Cap company with a market cap of Rs 73499.83 crore, operating in the Auto sector.

Hero MotoCorp's key products/revenue segments include Motorised Two Wheelers Upto 350cc Engine Capacity, Spares (Two Wheelers), Sale of services, Other Operating Revenue and Duty Drawback for the year ending 31-Mar-2024.

Financials

For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 10566.31 crore, down -1.45% from last quarter Total Income of Rs 10721.59 crore and up 5.33% from last year same quarter Total Income of Rs 10031.43 crore. The company has reported net profit after tax of Rs 1200.12 crore in latest quarter.

The company's top management includes Dr.Pawan Munjal, Mr.Rajnish Kumar, Air M'shal (Retd.)B S Dhanoa, Ms.Camille Tang, Ms.Tina Trikha, Mr.Pradeep Dinodia, Mr.Suman Kant Munjal, Ms.Vasudha Dinodia, Mr.Vikram S Kasbekar, Prof.Jagmohan Singh Raju. Company has Deloitte Haskins & Sells LLP as its auditors. As on 31-12-2024, the company has a total of 20 Crore shares outstanding.

Investment Rationale
Long-term Growth Strategy: Hero MotoCorp's 2030 strategy revolves around four key growth pillars: strengthening its core business, excelling in the premium segment, leading in EVs, and diversifying revenue streams. Guided by the 4S mantra?speed, scale, synergy, and simplification?the strategy also emphasizes building a future-ready organization and advancing ESG initiatives. As part of its portfolio reshaping, the company launched four new models at Bharat Mobility, reinforcing its position for long-term growth.
Product launches in premium scooters and EVs will drive growth, with new models set for Q4FY25 and FY26. The company is expanding its sub-Rs 1 Lc EV lineup with the Vida V2 platform, strengthening its presence in the mass-market scooter segment. New premium motorcycles like the Xpulse 210 and Xtreme 250R have received strong market feedback, while upcoming models, including the Xoom 125, Xoom 160, and Destini 125, will further enhance Hero?s scooter portfolio.

Hero achieved EBITDA of over Rs 10,000 per vehicle, driven by a richer product mix and strategic pricing. The ICE segment's EBITDA margin stood at 16%, down 50 bps QoQ, mainly due to higher marketing and advertising expenses during the festive season. The company aims to sustain overall EBITDA margins in the 14-16% range in the medium term, supported by a stronger product mix?EVs and higher cc motorcycles, ongoing product premiumization, lower material costs, and improved operational efficiencies, particularly in the EV segment.

Promoter/FII Holdings
Promoters held 34.74 per cent stake in the company as of 31-Dec-2024, while FIIs owned 27.95 per cent, DIIs 18.04 per cent.