Hero MotoCorp soars 4%, nears 52-week high on hopes of healthy Q1 results

Shares of Hero MotoCorp (HMCL) moved higher by 4 per cent to Rs 2,837, hitting an over four-month high on the BSE in Wednesday’s trade on expectations of strong June quarter earnings (Q1FY23). The stock of the world’s largest manufacturer of motorcycles and scooters traded at its highest level since February 18, 2022. The stock is just 4 per cent shy from its 52-week high of Rs 2,953 hit on September 17, 2021.

In the past three months, the stock price of HMCL has appreciated by 20 per cent as compared to 10 per cent decline in the S&P BSE Sensex. The stock has recovered 32 per cent from its 52-week low price of Rs 2,148 touched on March 8, 2022.

HMCL sold 1.39 million units in Q1FY23 and has reported robust double-digit growth of 35.7 per cent over Q1FY22, when the company had sold 1.03 million units. Sequentially, the company reported 17 per cent growth in total sales, when the company had sold 1.19 million units in Q4FY22.

HMCL said the growth in volume indicates the continuously improving consumer sentiment and the company expects the positive trend to continue in the coming months, on the back of a decent monsoon, and encouraging farm activity.

Near normal economic activity, healthy retail sales (Q1FY23 averaging at around 92 per cent of pre-Covid levels), robust demand in passenger vehicle (PV) segment amid new launches in the SUV domain, cut in excise duty on fuels (Rs 8/litre on petrol, Rs 6/litre on diesel) in May 2022 and plummeting key raw material prices (mainly metals) towards the fag end of the quarter post their peak in April May 2022 were the key highlights for Q1FY23E, analysts at ICICI Securities said in auto and auto ancillary sector update.

The brokerage firm is expected HMCL to report a healthy performance in Q1FY23 with total 2-wheeler sales volumes increasing 17 per cent. With ASPs expected to increase 2.0 per cent quarter on quarter (QoQ) to Rs 63,675/unit, we expect net sales to increase 19.3 per cent QoQ to Rs 8,852 crore.

A common feedback we received is about the pick-up in sales for most players in Q1 on a QoQ basis. All the dealers were of the view that the pick-up was led by a revival in rural sales as rural sentiment has improved with better crop realisation and improved output in many regions. Given that HMCL is a dominant player in India’s rural belt, it is seeing improved sales relative to peers, analysts at HDFC Securities said in its auto sector update.