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Motilal Oswal Sticks to 'BUY' on Hero MotoCorp
Motilal Oswal has reiterated its 'BUY' rating on Hero MotoCorp, setting a target price of ₹6,205. The brokerage firm views the company's outlook positively, driven by strong demand and growth prospects. However, analysts caution that rising input costs could pressure margins in the near term, even after recent price adjustments.
Key Growth Drivers: Demand Surges Across Segments
Demand for Hero MotoCorp's products is showing a significant upturn. This includes strong sales for the Splendor model, a revival in the 125cc motorcycle segment driven by launches like the Glamour and Xtreme125R, and healthy growth in both traditional and electric scooter sales. Exports are also showing a notable increase, adding another growth avenue for the company. The stock recently traded around ₹5,247.00, up 43% in the past year.
Market Position and Valuation Compared to Peers
The Indian two-wheeler market, the world's largest, is expected to grow between 6-8% annually until 2030. While Hero MotoCorp aims for a 7% volume CAGR from FY25 to FY28, the wider industry might see 3-6% growth in FY26-27. Hero MotoCorp's current Price-to-Earnings (P/E) ratio of about 20-22 is lower than peers like Bajaj Auto (28-31) and TVS Motor Company (57-84). Hero MotoCorp reported Q4 FY25 results in May 2025, with revenue at ₹9,939 crore and net profit at ₹1,081 crore, benefiting from price increases and a favorable product mix.
Future Outlook: Growth Projections Amid Cost Pressures
Looking ahead, Hero MotoCorp is projected to achieve an 11% compound annual growth rate (CAGR) in revenue, EBITDA, and profit after tax from FY25 to FY28, building on an expected 7% volume CAGR. This growth is expected to be supported by rural economic recovery and expansion in scooter and export sales. Analysts maintain a largely positive outlook, with a consensus 'Strong Buy' rating and average price targets indicating potential upside. The company's record full-year revenue and net profit in FY25 highlight its strong foundation, though managing rising input costs remains a key focus for sustained margin improvement.