Hero Motocorp shares traded lower in early trade on February 12 despite the two-wheeler maker reporting a 50% increase in its net profit for the quarter ended December 2023, which came on the back of robust sales across geographies.
Global brokerage CLSA has raised its target price of the Hero Moto stock following the third quarter result and has an outperform call on it. A few others, however, have maintained their target price which is below the last closing price of ₹4,908.50 on February 9.
CLSA has increased the target price to ₹5,246, implying nearly 7% upside from the last closing price. This is because the brokerage expects the two-wheeler maker to gain market share in the 125cc+ segment with launches.
It noted that Hero Moto’s gross margin expanded sequentially and that the company’s management has guided for double-digit growth for the industry. It also acknowledged that the firm’s EV business was loss-making.
The brokerage commentary comes as following the results, Hero MotoCorp CEO Niranjan Gupta stated, "In the coming fiscal, we will be launching new products in the mid and affordable segment as well. We believe we are well placed to accelerate growth and increase our market shares as we move forward."
Brokerage firm Nomura has set a target of ₹5,356 for the auto stock with a neutral rating as it believes the firm is pursuing the right strategy to lift growth and market share. It is also of the view that execution of 125cc, EVs and Harley are key monitorable for re-rating. Noting that margins were in line with its expectations, it said they were supported by commodities, leap savings and price hikes.
Nomura also highlighted that the company’s management expects FY25 industry revenue growth of more than 10% and the firm itself to grow faster.
However,
Goldman Sachs has given the stock a sell call with a target price of ₹3,730. This means it expects the share price to decline nearly 25% from the last closing price even as it acknowledges the market share picking up in ICE + EV.
It noted that the ICE 2W portfolio, which is presently at 16% EBITDA margin, is enabling 125 to 150 basis points of annualised EV business investment.
Morgan Stanley has given Hero Moto an underweight rating with a target price of ₹3,638. “The disruption risk in the core segment and elevated valuations keep us underweight,” it said.
The brokerage added that the firm’s management appears to be executing well on its strategy and that market share gains in the premium segment will be key to track.
Hero Motocorp shares were trading more than 3% lower at ₹4,760 on BSE at 10 am.
