Whalesbook
Hero MotoCorp's stock gained ground as Jefferies upgraded its rating, but the analyst's price target suggests that the recent climb might offer limited further upside.
Jefferies upgraded Hero MotoCorp to 'Hold' from 'Underperform' on May 7, 2026. This follows the company's announcement of record revenue and profit for the fourth quarter of fiscal year 2026. The brokerage cited stabilizing demand in the two-wheeler market, a recovery in market share, and promising medium-term prospects from its electric vehicle (EV) and internal combustion engine (ICE) portfolios. However, Jefferies maintained its price target at Rs 5,000 per share. This target is below the stock's recent trading price of Rs 5,170, suggesting the firm sees limited room for significant appreciation in the near term, despite the improved outlook.
Hero MotoCorp posted strong financial results for FY26. For the quarter ending March 31, 2026, consolidated revenue rose 29% year-on-year to Rs 12,797 crore, with net profit increasing 30% to Rs 1,401 crore. For the full fiscal year, the company achieved its highest-ever annual revenue of Rs 46,830 crore and profit after tax of Rs 5,268 crore. Its electric mobility arm, Vida, saw retail sales jump about 190% year-on-year in FY26. The company's global business also reached a record high with 4.03 lakh units dispatched, up 40%. The board recommended a final dividend of Rs 75 per share, making the total FY26 dividend Rs 185 per share.
In the wider market, Hero MotoCorp's trailing twelve months (TTM) Price-to-Earnings (P/E) ratio stands between 17.4 and 20.62. This valuation is more conservative than rivals like Bajaj Auto (TTM P/E around 26.8-32.45) and TVS Motor, which trades at a P/E range of 55.52-63.2. The Indian two-wheeler market closed FY2026 with strong domestic wholesale volumes hitting a record around 22 million units. Retail sales in April 2026 also showed healthy year-on-year growth of 13.01%. The electric two-wheeler segment is expanding, with retail volumes up 21.9% in FY2026 and EV sales surging 29.7% year-on-year in the first four months of 2026. However, industry forecasts predict a moderation in wholesale volume growth to 3-5% for FY27, citing a higher base and potential impacts from weather on rural demand.
Despite the upgrade, analysts point to several concerns. Jefferies' maintained target price of Rs 5,000, which is below the current trading price of approximately Rs 5,434, suggests the firm believes the stock's recent gains have outpaced fundamental value improvements. Goldman Sachs maintains a 'Sell' rating with a target of Rs 4,300, implying a potential downside of nearly 17%. Persistent margin pressures remain a concern, as Q4 FY26 saw EBITDA margins at 14.5% with EBITDA per vehicle flat sequentially. Near-term risks include commodity inflation and supply chain stability. The P/E gap compared to peers like TVS Motor might suggest Hero MotoCorp is valued more conservatively, or that competitors are expected to grow faster.
Looking ahead, management described FY26 as a 'defining chapter,' driven by growth in premium motorcycles, electric vehicles, and international operations. Some analysts remain bullish, with Motilal Oswal maintaining a 'Buy' rating and a target of Rs 6,248, expecting benefits from rural recovery and growth in scooters and exports. Citi retains a 'Buy' with a target of Rs 6,900, citing robust demand post-GST cuts and successful market share expansion in scooters and EVs. However, Citi also flagged potential inflation and adverse rural income trends as headwinds. While industry volume growth for FY27 is projected to moderate, sustained demand and product expansion should support the sector.