Broker’s call: Hero MotoCorp (Buy)

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Target: INR 3,200

CMP: INR 2952.50

We attended Hero MotoCorp’s (HMCL’s) analyst meeting and interacted with leadership to understand future business strategy.

The company is making concerted efforts to accelerate profit growth in the future. Recent product interventions (Xtec and Xoom) have been well received. The product pipeline remains strong with multiple new launches expected, going forward, across the 125cc, luxury motorcycles, scooters and electric vehicles category.

HMCL is also upgrading the customer experience by digitalizing the buying journey and plans to open more than 500 “Hero 2.0” stores and more than 100 exclusive premium stores. The near-term focus will also be on expanding the range of electric vehicles through network and product expansion. A richer product range, accelerated growth in parts revenue, increased localization, operating leverage and raw material mitigation are the main drivers for profitable growth, going forward.

Positive operating leverage and lower commodity prices will also support margin recovery. HMCL owns a 35 percent stake in Ather and will continue to support the company. HMCL has also collaborated with Zero Motorcycles to develop high quality electric motorcycles. Management has indicated that it remains open to any inorganic opportunities/collaborations that would help accelerate its EV journey.

Keep buying with unchanged TP 2024 valued at INR 3,200. A recovery in rural demand will be a key component to be seen.