India is one of the largest two-wheeler markets in the world, driven by factors like increasing urbanization, rising disposable incomes, and a strong demand for affordable personal mobility. The market offers significant growth prospects, particularly in electric vehicles (EVs), as the government pushes for sustainable transportation.
Major players such as Bajaj Auto, Hero MotoCorp, TVS Motors, and Eicher Motors dominate the Indian two-wheeler segment, offering a wide range of motorcycles and scooters. With evolving consumer preferences and advancements in technology, the industry is expected to grow further, especially in the electric two-wheeler segment, contributing to India’s shift towards green mobility solutions.
Hero MotoCorp’s Dominance in the Indian Market
Hero MotoCorp holds a commanding 30.8% share of the Indian two-wheeler market, maintaining its leadership position, especially in rural and semi-urban regions. The company’s dominance is built on a vast dealer network and a strong brand presence in the commuter segment. Honda Motorcycles & Scooters follows with a 23.36% market share, positioning Hero as the dominant player in the sector.
Growing Competition from TVS and Bajaj Auto
However, TVS and Bajaj Auto are gradually making significant inroads into Hero’s market share. TVS commands 16.93%, while Bajaj Auto holds 12.03%. Both companies have expanded their portfolios aggressively, especially in the premium and electric two-wheeler segments, attracting younger consumers with innovative designs, competitive pricing, and cutting-edge technology. This growing competition is narrowing the gap between the market leaders and challengers, signaling a shift in the two-wheeler industry landscape.
Share Price
The shares of Hero MotoCorp have closed at Rs. 4,123 down by 0.44% from its previous close of Rs. 4,141 as of January 10, 2025. The 52-week high of the company lies at Rs. 6,246.
Sell Off from the Recent High
Hero MotoCorp’s shares recently hit a lifetime high of ₹6,246 but have since fallen by more than 33%. This significant sell-off can be attributed to a decline in the company’s sales figures. In December 2024, Hero MotoCorp sold 324,906 units, a sharp drop from 393,952 units sold in December 2023.
The downturn was mainly driven by weak motorcycle sales, which fell to 298,516 units in December 2024 from 354,658 units in the previous year. Additionally, scooter sales also saw a decline, dropping to 26,390 units from 39,294 units in December 2023. This sales slump has negatively impacted investor sentiment, leading to a sharp drop in stock value.
YoY Financials
Sales Performance
Hero MotoCorp has witnessed a steady growth in sales from ₹9,533 crore in September 2023 to ₹10,483 crore in September 2024. This 10% growth in sales indicates strong demand for their products despite a competitive market, demonstrating the company’s resilience.
EBITDA and Operating Margin
The company’s EBITDA increased slightly from ₹1,360 crore in September 2023 to ₹1,450 crore in September 2024, reflecting better operational efficiency. Its Operating Profit Margin (OPM) remained stable at 14% for both periods, signaling consistent cost management and a healthy profit generation from core operations.
Net Profit
Hero MotoCorp’s net profit rose from ₹1,007 crore in September 2023 to ₹1,066 crore in September 2024, reflecting a positive impact of improved sales and profitability. The increase in net profit underscores the company’s ability to manage costs and optimize revenue.
Key Metrics of the Company
Hero MotoCorp Ltd., with a market capitalization of ₹83,260 Crores, is a leader in the Indian two-wheeler market. The company boasts a PE ratio of 20.2, reflecting investor confidence despite a competitive market. With an ROCE of 29.1%, Hero demonstrates strong capital efficiency, generating significant returns from its investments.
The debt-to-equity ratio of 0.03 highlights the company’s conservative financial approach and low financial risk. Hero’s P/BV ratio of 4.38 indicates a decent market valuation, as compared to the other 2-wheeler manufacturers in the industry, this is primarily driven by future growth expectations.
Additionally, its PEG ratio of 8.45 suggests strong growth potential, particularly in the premium and electric two-wheeler segments, reinforcing its strong market position.
Future Outlook
Hero MotoCorp has ambitious plans for the future, aiming to launch premium motorcycles and scooters, including electric models, at the Bharat Mobility 2025 event. This initiative reflects the company’s commitment to innovation and its strategic vision to meet the evolving demands of both Indian and global markets.
By focusing on premium and electric two-wheelers, Hero MotoCorp aims to tap into the growing demand for advanced, sustainable mobility solutions. The company is positioning itself to be a key player in the future of the two-wheeler market, aligning with global trends toward eco-friendly transportation and cutting-edge technology.
Brokerage Target By ShareKhan (45% Upside Target)
Sharekhan is bullish on the stock with a target price of Rs 6,057, citing strong margin expansion and robust performance in its internal combustion (IC) business. The brokerage highlighted that the underlying IC business saw a 150-bps year-on-year EBITDA margin expansion to 16.5%, driving a sharp improvement in gross margins.
Management’s confidence in maintaining blended EBITDA margins at 14-16% further supports the positive outlook.
Sharekhan retained a BUY rating, emphasizing the company’s focus on premiumization, successful new product launches, and growth in the electric vehicle (EV) market. The stock’s valuation at a P/E of 16.8x/15.3x and EV/EBITDA of 11.1x/10.1x on FY26E/FY27E estimates reflects strong growth potential and attractive investment opportunities.
Conclusion
Based on the comprehensive analysis, Hero MotoCorp presents an interesting investment opportunity despite recent market share challenges and stock price decline. While the company maintains its market leadership with a 30.8% share and shows strong financial metrics including a healthy ROCE of 29.1% and a low debt-to-equity ratio of 0.03, it faces increasing competition from TVS and Bajaj Auto.
However, Hero’s strategic focus on premium segments and electric vehicles, coupled with Sharekhan’s bullish outlook targeting a 45% upside to Rs 6,057, suggests potential for growth. The company’s stable operating margins and ambitious plans for Bharat Mobility 2025 indicate a promising future trajectory despite current market pressures.
Written By: Dipangshu Kundu
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