Hero MotoCorp shares soar: Brokerages retain ‘Buy’ call after strong Q2 results

Hero MotoCorp shares surged 5% on 18 November 2024, buoyed by positive Q2 FY25 results and brokerages reiterating their 'Buy' ratings. The company’s promising performance, driven by rural demand recovery, upcoming launches, and improved margins, has cemented investor confidence. 

Below, we analyse the key factors behind this uptick and what it means for share market investment enthusiasts.

Hero MotoCorp’s Q2 FY25 highlights

Hero MotoCorp delivered an impressive Q2 FY25 performance, reflecting strong fundamentals and growth prospects.

• Net profit growth: 14% YoY to ₹1,204 crore.
• Revenue increase: 11% YoY to ₹10,483 crore.
• EBITDA margin improvement: Rose to 14.5% from 14.1% in the previous year.
• Year-to-date stock performance: Up nearly 16%, outperforming Nifty 50’s 8% gain.

Positive brokerage outlook fuels confidence

Brokerages reaffirmed their 'Buy' stance on Hero MotoCorp, highlighting several growth drivers:

1. Rural demand recovery: A healthy monsoon and festive season drove strong two-wheeler sales in rural markets.
2. Premium bike and EV launches: New products in the premium and EV segments are expected to drive long-term growth.
3. Margin focus: Hero MotoCorp aims to sustain margins in the 14-16% range while expanding its network.
4. Revenue and earnings growth: Forecasts include an 8% revenue CAGR and a 10% core earnings CAGR over FY24-27.
5. Dividend yield: Attractive at 4%, supported by healthy free cash flows.

Key product launches on the horizon

Hero MotoCorp is gearing up for multiple launches across segments, poised to strengthen its market position:

• Premium bikes: Upcoming models include Xpulse 210, Xtreme 250R, and Karizma XMR 250.
• Scooter portfolio expansion: Three new ICE scooters are set for launch by March 2025.
• VIDA EV range: Plans to expand offerings across price points to meet growing demand.

Hero MotoCorp’s strategic retail expansion?

To enhance its market presence, the company is expanding its premium retail network:

• Over 100 Premia stores planned by FY25-end.
• Focus on providing an enhanced shopping experience for premium segment buyers.

What does this mean for share market investment?

Hero MotoCorp's strong Q2 results, robust rural demand, and strategic focus on innovation and expansion make it a compelling pick for share market investment. Key takeaways for investors include:

• Strong fundamentals and consistent dividend yield.
• Opportunity to capitalise on the two-wheeler industry upcycle.
• Promising growth in premium and EV segments.