Hero MotoCorp Shares climb 3% following a 5% increase in August auto sales

Hero MotoCorp, one of the most prominent players in the two-wheeler industry, witnessed a notable 3% surge in its share price on September 2nd, driven by an impressive 5% increase in auto sales for August. This strong performance has caught the attention of investors, especially those looking to buy shares online, as the market resumes to show signs of recovery.

A closer look at the numbers

In August, Hero MotoCorp reported total sales of 5.12 lakh units, a significant rise from the 4.88 lakh units sold during the same period last year. This impressive figure even surpassed CNBC-TV18's estimate of 4.89 lakh units, indicating the company's strong market presence. Despite minor setbacks due to supply-side shortages, which are expected to normalise in September, the company remains optimistic about its future growth prospects.

Domestic sales also saw a 4% year-on-year increase, reaching 4.92 lakh units compared to 4.72 lakh units sold in August 2023. The company's electric vehicle (EV) brand, VIDA, also demonstrated remarkable progress, with monthly dispatches crossing the 6,000-unit mark for the first time. This success pushed VIDA's retail market share to over 5%, highlighting Hero MotoCorp's growing influence in the EV sector.

Exports were another bright spot for Hero MotoCorp, with a 27% growth in units sold abroad. The company exported 20,097 units, up from 15,770 units in the same month last year. The 125cc segment, especially the Xtreme 125R, continues to perform well, contributing to the company's overall success.

Growth drivers and future outlook

Hero MotoCorp's robust performance can be attributed to several key factors:

1. The rural segment is expected to recover faster than anticipated, boosting demand for two-wheelers in these areas.
2. The 125cc segment, where Hero MotoCorp has a strong presence, continues to grow, driven by the success of models like the Xtreme 125R.
3. The company has been investing heavily in its power brands and introducing new scooter models, which are likely to resonate well with consumers.

With the festive season coming, Hero MotoCorp is well-positioned to capitalise on the expected increase in consumer spending. Brokerage firm Motilal Oswal Financial Services (MOFSL) has a positive outlook on the company's future, estimating an 8% growth in volumes for FY25. This projection suggests a residual growth rate of 7% or a monthly run rate of 5.20 lakh units.

Key takeaways

1. Share price surge: Hero MotoCorp's shares gained 3% on September 2nd, driven by a 5% rise in auto sales for August, surpassing market expectations.
2. Strong domestic and export performance: The company saw a 4% increase in domestic sales and a 27% growth in exports, reflecting its strong market position.
3. Positive future outlook: With faster recovery in the rural segment, growth in the 125cc segment, new scooter launches, and festive season demand, Hero MotoCorp is expected to grow ahead of the industry.
4. Investment Opportunity: For those planning to buy shares online, Hero MotoCorp presents a promising opportunity, backed by strong sales growth and a positive outlook for the future.