Shares of Hero MotoCorp surged by over 6 per cent in early trading on Monday, propelled by the release of the leading two-wheeler manufacturer’s Q4 results, which exceeded expectations.
Hero MotoCorp share price opened at Rs 4631.90 against its previous close of Rs 4624.35 and soon rose 6.4 per cent to the level of Rs 4,919.85 on the BSE.
On Wednesday, May 8, Hero MotoCorp announced an 18 per cent year-on-year (YoY) rise in its standalone net profit, totaling Rs 1,016 crore compared to Rs 858.93 crore recorded in the corresponding period of the previous year.
Revenue from standalone operations for the quarter surged by 14 per cent to Rs 9,519 crore from the previous year’s Rs 8,306.78 crore reported in the corresponding quarter.
In Q4FY24, the company reported sales of 13.92 lakh units of motorcycles and scooters, a notable increase from the 12.70 lakh units sold in Q4FY23. Moreover, the total units sold for the entire financial year 2024 reached 56.21 lakh, marking a rise from the 53.29 lakh units sold in FY23.
Should You Buy, Sell or Hold?
Jefferies
As 2-wheelers are poised for growth, the company expects industry revenue to grow in double digits. The quarter was good, with an all-time high EBITDA/vehicle for Hero MotoCorp. The brokerage foresees a 17 per cent EPS CAGR over FY24-26.
Jefferies maintained their ‘buy’ rating with a target price of Rs 5,650.
Nuvama
“Hero MotoCorp is a key beneficiary of the likely uptick in rural demand owing to its strong network. We forecast revenue and earnings CAGR of 11 per cent and 15 per cent, respectively, over FY24–26E with healthy FCF (nearly Rs 3,900 crore per year) and dividend yield (nearly 4 per cent),” said Nuvama Wealth Management.
Nuvama has a buy call on the stock with a target price of Rs 5,800, implying a 25 per cent upside potential.
Motilal Oswal Financial Services
Brokerage firm Motilal Oswal Financial Services has maintained a buy call on the stock with a target price of Rs 5,320, implying a 15 per cent upside potential.
Motilal Oswal expects Hero MotoCorp to deliver a volume CAGR of 9 per cent over FY24-26E, led by new launches in 125cc, scooters and premium segments, and a ramp-up in exports.
HMCL will also benefit from a gradual rural recovery, given strong brand equity in the economy and executive segments, Motilal said.
“We expect a CAGR of nearly 13.5 per cent, 15 per cent and 17 per cent in revenue, EBITDA and PAT, respectively, over FY24-26E. The stock currently trades at nearly 19.4 times and 16.5 times FY25E and FY26E EPS, respectively. We reiterate our buy rating on the stock with a target price of Rs 5,320 (18 times FY26E EPS + Rs 137/ Rs 132 for Hero FinCorp/Ather after 20 per cent holding company discount),” said Motilal Oswal.
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