The Indian two-wheeler sector has been on an exhilarating journey, with sales anticipated to surpass pre-Covid levels in FY 23-24. Industry projections indicate an approximate 13% increase in domestic two-wheeler sales, reaching a peak of 18.4-18.5 million units in FY24.
In the vibrant world of motorcycles, one name resonates more powerfully than the rest – Hero MotoCorp. This giant, known as the world’s largest two-wheeler manufacturer, has been a trailblazer, setting the tempo in the global automotive sector.
Recently, Hero MotoCorp has revved up the excitement in a different arena. The company’s Q4 results have been unveiled, and they are nothing short of a grand spectacle. The article aims to provide a comprehensive analysis of the recent surge in Hero MotoCorp’s share prices following their Q4 results.
About Hero MotoCorp
Hero MotoCorp Ltd., recognized as the world’s premier two-wheeler manufacturer is a shining symbol of technological advancement and sustainability. With its footprint in 47 countries and a satisfied customer base exceeding 115 million, the company proudly stands on a foundation of 40 years of trust and technological supremacy.
Sustainability forms the crux of Hero MotoCorp’s operations, with lofty targets such as achieving 100% zero waste to landfill facilities by 2025, 100% carbon-neutral operations by 2030, and 500% water-positive facilities by 2025. The company’s electric scooter brand, VIDA, powered by Hero, signifies the dawn of the Electric Age with eco-friendly mobility technology.
Innovation is a pivotal driver for Hero MotoCorp, which takes pride in having filed 750 patents and having a team of 1000 engineers and technology experts across 2 top-tier tech centres. The company’s global presence is further amplified through strategic alliances, such as the partnership with Harley-Davidson in India, an equity stake in Ather Energy, and the joint development of electric motorcycles with Zero Motorcycles.
Hero MotoCorp’s commitment to sustainability extends to preserving biodiversity, tree plantation, and water conservation initiatives, such as those at the Aravali Biodiversity Park and promoting water harvesting measures in dry regions. The company’s journey commenced with the establishment of Hero Honda Motors Ltd. in 1984.
When talking about Hero MotoCorp’s share bonus history, the company has not announced any bonus since Jan 1, 2000.
Hero MotoCorp Q4 results
Here are some of the key financial metrics of the recent quarter results as compared to the same quarter previous year:
| Q4 FY24 | Q4 FY23 | |
| Net revenue (₹ crores) | 9,617 | 8,434 |
| Operating profit (₹ crores) | 1,319 | 1,089 |
| Profit before tax (₹ crores) | 1,292 | 1,128 |
| Net profit (₹ crores) | 943 | 811 |
| EPS (₹) | 46.77 | 40.29 |
Source: Screener
Must read: Earnings Per Share (EPS): What it means and how to calculate it
Annual performance
Here are some of the key financial metrics of the annual results as compared to the previous year:
| FY24 | FY23 | |
| Net revenue (₹ crores) | 37,789 | 34,158 |
| Operating profit (₹ crores) | 5,229 | 4,099 |
| Profit before tax (₹ crores) | 5,090 | 3,864 |
| Net profit (₹ crores) | 3,742 | 2,800 |
| EPS (₹) | 187.31 | 140.61 |
Source: Screener
Market reaction – Hero MotoCorp shares news
Hero MotoCorp unveiled its Q4 FY2024 results on Wednesday, May 8. Following the announcement, the stock experienced a rise, closing 3.3% higher on the same day.
Observing the trading pattern over the past 5 days, the upward trend in Hero Motocorp’s share rate is distinctly noticeable:
Source: Google Finance
Analyst opinions and predictions
The outlook of Hero Motocorp’s share price target appears to be a subject of diverse perspectives among various investment houses.
Nuvama Wealth Management has a positive outlook, suggesting that Hero MotoCorp could greatly benefit from an expected increase in rural demand due to its robust network. They predict a Compound Annual Growth Rate (CAGR) of 11% in revenue and 15% in earnings over FY24-26E.
They also anticipate a healthy Free Cash Flow (FCF) of nearly ₹3,900 crore per year and a dividend yield of nearly 4%. Nuvama has issued a ‘buy’ call on the stock with a target price of ₹5,800, indicating a potential upside of 25%.
Motilal Oswal Financial Services also maintains a ‘buy’ call on the stock, with a target price of ₹5,320, suggesting a 15% upside potential.
They expect Hero MotoCorp to deliver a volume CAGR of 9% over FY24-26E, driven by new launches in the 125cc, scooters, and premium segments, and an increase in exports. They also foresee a CAGR of nearly 13.5%, 15%, and 17% in revenue, EBITDA, and PAT, respectively, over FY24-26E.
However, Kotak Institutional Equities holds a different view. While they acknowledge that Hero MotoCorp may benefit from the continued momentum in the domestic two-wheeler industry, they believe that the company’s market share gain would be limited. They have maintained a ‘sell’ rating on the stock but revised the fair value to ₹3,950 from ₹3,675 earlier.
Also read: EBITDA explained: Definition, calculation, significance, and more
Strengths and weaknesses
Strengths
- Dominant market position: Hero MotoCorp maintains its status as a frontrunner in India’s two-wheeler market, despite a minor decrease in its market share from 28% in March 2023 to 27% in January 2024. The company’s prominence is especially marked in the market for entry-level motorcycles, ranging from 75cc to 110cc.
- Strong brand and wide network: The firm’s standing in the market is reinforced by its powerful brand image and a widespread network for distribution and service.
- Presence in the EV segment: Hero MotoCorp has established a presence in the electric vehicle (EV) market, securing approximately 2% of the market share. The company’s EV brand, ‘Vida,’ is now offered in 150 outlets spread over 100 cities.
- Strategic focus on market share improvement: The firm is actively pursuing efforts to enhance its presence in the executive and high-end bike categories. This involves introducing fresh models such as the Hero Karizma and HD X440, through a collaboration with Harley Davidson, and forthcoming releases in the motorcycle category exceeding 125cc.
- Robust financial risk profile: Hero MotoCorp features a robust financial risk profile, marked by minimal debt, significant net worth, and considerable cash holdings. The company’s financial statements reflect an essentially debt-free status.
Weaknesses
- Intense competition: Hero MotoCorp is encountering intense rivalry in India’s two-wheeler segment from key competitors such as Honda Motorcycles & Scooters India Pvt Ltd (HMSI), Bajaj Auto Ltd, and TVS Motors Ltd. Additionally, the electric vehicle (EV) sector is witnessing a surge in competition as new original equipment manufacturers (OEMs) are making their entry.
- Modest presence in the premium motorcycle segment: The firm holds a minor stake in the high-end bike market, possessing only a 0.7% share within the national market as of January 31, 2024.
- Low geographic diversity: The firm’s revenue is primarily derived from the local market, as nearly 97% of its motorcycle sales occur within India. This limited geographical spread may expose the company to risks associated with downturns in the local economy.
Further reading: Investor Alert: 9% Decline in Share Price Post Coforge’s Q4 Earnings
Bottomline
Hero MotoCorp’s recent performance, as highlighted by its Q4 results and market reactions, underscores its enduring position as a powerhouse in India’s two-wheeler sector.
With a strong foundation built on technological excellence, customer trust, and a global footprint, Hero MotoCorp continues to drive the evolution of mobility while adhering to its core values of passion, integrity, and responsibility.
