This Nifty 50 stock hit new high in weak market; zoomed 95% from 52-wk low

Shares of Hero MotoCorp hit a new high of Rs 5,349, surging nearly 4% on the NSE in Tuesday's intra-day trade, as compared to 5.8% decline in the Nifty 50.

Shares of Hero MotoCorp (HMCL) hit a new high of Rs 5,349, surging nearly 4 per cent on the National Stock Exchange (NSE) in Tuesday’s intra-day trades on expectation that macro‐economic factors shall aid the industry’s growth. In comparison, Nifty 50 was down 5.8 per cent at 21,920 at 02:28 pm.

In the past one month, the stock price of the two-wheeler (2-W) company has rallied 18 per cent. It has zoomed 95 per cent from its 52-week low of Rs 2,745.05 touched on June 20, 2023.

With commodity prices remaining stable, expectations of normal monsoons, and government spending expected to increase, the company will see multiple tailwinds for the sector over the upcoming quarters, HMCL said.

In the near future, HMCL is expected to take big strides in electric vehicle (EV), through product launches in mid and affordable segment. Overall, the management sees a very positive outlook for the upcoming years.

HMCL is the world’s largest 2-W manufacturer by volume, with domestic market share at 30.2 per cent as of FY24. Its suite of popular models includes Splendor, Passion, Glamour, etc. HMCL’s scooter market share was at 6.9 per cent; motorcycle market share at 43.1 per cent (FY24). The company’s presence in the EV space is through its captive offerings under Vida brand as well as through investments in Ather Energy, Gogoro & Zero Motorcycles.

While the stock has done well recently on an absolute basis, its relative performance vs. 2-W peers is still lagging. With rural demand tailwind expected in FY25F for the 2-W industry, HMCL is best placed to encash it and reverse the market share erosion, according to analysts.

On high base & impending union election industry, the commentary is cautious on growth prospects in the passenger vehicles (PV) & commercial vehicles (CV) space for FY25E, with 2-W emerging as a sole shining star and expected to outperform the industry going forward, driven by both revival in domestic demand & bottoming out of export volumes. HMCL with market leadership in domestic motorcycle segment is expected to benefit from this trend amid slew of exciting recent launches, analysts at ICICI Securities said.

HCML has a capital efficient business model with cash rich balance sheet. With focus on premiumisation and Electrification, it now has the right product slate to grow ahead of the industry. Consequently, the brokerage firm has turned positive on HMCL and assigns BUY rating on the stock. It has valued it at Rs 5,600 i.e. 17x PE on standalone earnings and 3x P/B to its long-term investments.

While HMCL’s market share performance has been weak in recent quarters, the strong rural demand tailwind expected via 6 per cent above-normal rainfall prediction by the India Meteorological Department to help HMCL, which has dominance in rural and entry- level bikes, according to Incred Research Services.

The brokerage firm expect close to double-digit growth in 2-W sector demand, leading to a net sales upgrade of 3 per cent for FY25F-26F. Baking in a gradual and sustained EBITDA margin trend of recent quarters and the strong pricing power in entry bikes, the brokerage firm upgrades EBITDA by around 8 per cent for FY25F-26F.