Hero MotoCorp share price gains 3% on Q1 earnings: Buy, sell or hold?

Shares of Hero MotoCorp gained over 3 per cent today after the two-wheeler firm reported over two-fold rise in consolidated profit after tax for the quarter ended June 2022. Profit for Q1 stood at Rs 585.58 crore riding on higher sales against Rs 256.46 crore in the corresponding period of last fiscal. Hero MotoCorp stock gained 3.02 per cent intraday to Rs 2844.8 against the previous close of Rs 2,760. 90 on BSE.

Shares of Hero MotoCorp gained 3 per cent in a year and rose 15 per cent in 2022. Market cap of the firm rose to Rs 56,576 crore on BSE.

Total 0.19 lakh shares changed hands amounting to a turnover of Rs 5.38 crore on BSE. The stock hit a 52-week high of Rs 2,952.60 on September 17, 2021 and a 52-week low of Rs 2,148 on March 8, 2022.

Revenue from operations in Q1 stood at Rs 8,447.54 crore compared to Rs 5,502.80 crore in the corresponding period a year ago.

ALSO READ: Hero MotoCorp posts over 2-fold rise in consolidated profit after tax

The company sold 13.90 lakh units of motorcycles and scooters in the first quarter of the current fiscal, a growth of 36 per cent over the corresponding period in the previous fiscal.

A combination of cost-saving measures, judicious price increases and premiumisation of model line-up helped the company maintain its margins despite commodity headwinds and supply chain disruptions due to geo-political issues, it added.

Total expenses rise to Rs 7,692.93 crore compared to Rs 5,169.4 crore in the corresponding period of last fiscal. Cost of materials consumed stood at Rs 6,095.68 crore, up from Rs 4,174.94 crore in the first quarter last fiscal.

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HDFC Securities Institutional Research Desk has raised its target price for the insurer.

"In  the  premium  segment, Hero MotoCorp targets  to  double  its  market  share  to 10 per cent in the coming years on the back of at least one launch a year for the next 3-4  years  (Hero MotoCorp's  share  in  the premium  segment  in  towns  like  Bangalore, Coimbatore, Cochin,  Allahabad,  Azamgarh, and Bareilly  has  already  reached 10 per cent). Sustained demand recovery in motorcycles, especially from rural regions, is likely to be a key upside trigger for the stock. At 12.4x FY24 PER, the valuation is attractive. We maintain BUY with a revised target price of Rs 3,347 (from Rs 3,268) due to roll-forward to June-24 estimates", said the brokerage.

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JM Financial has assigned a buy call to the two-wheeler stock."The company has multi-pronged approach toward EVs with investments in Ather, partnership with Gogoro and in-house product development (first product expected during upcoming festive period). The company remains focused on a) exports, b) premiumisation of MC and c) scooterisation. We expect Hero MotoCorp to draw support from improving consumer spending going ahead leading to 14 per cent volume CAGR (over FY22-24E). We estimate standalone EPS to post c.32 per cent CAGR over FY22-24E. Maintain BUY with March 2023 target price of Rs 3,200 (15x forward earnings). Demand sustenance post upcoming festive season will be key monitorable," the brokerage said.

Prabhudas Lilladher has given a buy call with a target price of Rs 3,130 against the price of Rs 2,762.

"We maintain BUY, as we believe Hero will benefit from (1) rural recovery and festive season demand (2) increasing focus on exports and premiumisation (3) incremental savings through Leap savings program leading to margin expansion and (4) success in EV via investment in Ather, in-house mass product (Vida) and JV with Gogoro. Our estimates are largely unchanged. Maintain 'BUY' with a target price of Rs 3,130 (at 15x on FY24E standalone EPS, Rs 143 for Fincorp and Rs 63 for Ather)," the brokerage said.

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