Hero MotoCorp aims to boost market share with showroom revamp, portfolio diversification: Report

Hero MotoCorp analysis: Hero MotoCorp has reported a robust 21 per cent year-on-year revenue growth at Rs 9,724 crore, aligning closely with the estimated Rs 9,630 crore, analysts said. The growth was supported by a 2.8 per cent increase in average selling price (ASP) and a 17.8 per cent surge in volume compared to the previous year. 

The company’s earnings before interest, taxes, depreciation and amortisation (EBITDA) surged 47.9 per cent year-on-year (YoY) to Rs 1,362 crore, slightly surpassing the estimated Rs 1,354 crore, brokerage firm Choice Broking said in a note. 

The New Delhi-based company’s margin expanded by 250 basis points (bps) annually and showed a minimal decline of 6 bps quarterly to 14 per cent, adjusting to EV impact, it stood at approximately 16 per cent. Meanwhile, the EBITDA per vehicle also rose 25 per cent to Rs 9,329 per vehicle, attributed to a better product mix.

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Its quarterly profit after tax (PAT) zoomed 51 per cent to Rs 1,074 crore, albeit slightly below the estimated Rs 1,300 crore, owing to overall improvement in profitability. Additionally, the company declared an interim dividend of Rs 75 per share and a special dividend of Rs 25 per share.

In the mechanised segment, Hero MotoCorp is investing approximately Rs 2,000 crore in its Tirupati plant to achieve a potential revenue of Rs 10,000 crore, boosted by micro-level distribution strategies and customer inclination towards purchasing premium products. 

The company is also strategically focusing on key export markets such as Mexico, Nigeria, Colombia, and Bangladesh. Notably, distribution enhancements have been made in Nepal and Bangladesh to augment sales, the brokerage firm said.

To support industry-leading growth, the company is upgrading around 500 showrooms out of a total of 6,000 within the next 6 months and has launched a new model, the XTREME 125R, in the 125CC segment. 

Meanwhile, efforts are underway to enhance supply chain capacity for Harley Davidson and Karizma models, with an initial target of 10,000 units per month.

Choice Broking noted that the two-wheeler company is actively responding to the market's premiumisation trend by concentrating on entry-level and 125+CC segments. The company is leveraging digitisation initiatives to broaden its product reach, with online channels contributing to 12.4 per cent of conversions.

Hero MotoCorp is set to improve its market share through strategic initiatives such as showroom refurbishment and portfolio upgrades, the brokerage firm said.

Moreover, the company's limited exposure to electric vehicles, approximately 8 per cent of overall volume, and plans to scale up its electric vehicle (EV) portfolio and enter the middleweight motorcycle segment with HD-X440 bode well for its future prospects. Considering these factors, Choice Broking has an ‘add’ rating with a target price of Rs 5,364 per share.

As of 9:20 am, shares of Hero MotoCorp were trading 2.58 per cent lower at Rs 4,782 per share.