Whalesbook
Strong Revenue Growth Expected
Hero MotoCorp expects a strong finish to fiscal year 2026, with Q4 results likely showing significant revenue growth. Analysts forecast revenue to increase 25% to 28% year-on-year. This jump is driven by higher sales volumes and improved average selling prices (ASPs), reflecting strategic pricing and a better product mix. Domestic demand remains solid, and exports are also growing. For example, JM Financial projects ₹12,605 crore in revenue, HDFC Securities estimates ₹12,580 crore, Axis Direct forecasts ₹12,462 crore, and Nirmal Bang expects ₹12,782.9 crore.
Profit Margins Face Headwinds
Although revenue is set to rise, profitability is a key concern. Analyst views on EBITDA margins are mixed. Some expect margins to drop by 10 to 40 basis points compared to the previous quarter, mainly due to higher commodity and production costs. JM Financial predicts a 10 bps dip, and HDFC Securities forecasts a 40 bps decline. Others, however, foresee a slight margin increase of up to 9 bps, thanks to better operational efficiency, a more premium product mix, and cost savings. Axis Direct anticipates a 9 bps sequential margin increase. Sustaining cost-saving efforts will be vital to offset rising prices for materials like aluminum and copper.
Industry Competition and Valuation
The overall Indian auto sector is facing challenges, with industry sales expected to grow 6-8% in 2026, supported by government policies and demand. However, rising costs are affecting profits industry-wide. Hero MotoCorp's P/E ratio of 18-20x appears lower than rivals such as TVS Motor Company (over 50x P/E) and Bajaj Auto (around 29x P/E). While Hero MotoCorp's focus on entry-level bikes provides stability, competitors like TVS Motor are using their higher valuations to highlight growth prospects in premium models and EVs. Hero MotoCorp's electric vehicle brand, Vida, is growing but faces strong competition from Ather Energy and Ola Electric.
Market Share Erosion and Analyst Ratings
Despite revenue growth, significant concerns affect Hero MotoCorp's future. The company has lost market share, with its domestic two-wheeler market share dropping to about 28% in April-November 2025, a 25-year low. This trend continued in December 2025, falling to around 21%. These declines, especially in popular 110-125cc models, impact overall results. Analyst ratings reflect these issues. MarketsMojo downgraded the stock to 'Hold' in April 2026, citing mixed technicals. Jefferies downgraded Hero MotoCorp to 'Underperform' in December 2025, warning of potential downside and calling its valuation expensive. Past executive departures and CEO changes have also added to investor unease. Although the Ministry of Corporate Affairs (MCA) has reportedly closed past investigations into corporate governance and fund diversion, some reports indicated the examination was ongoing in March 2025, leaving some reputational questions.
Looking Ahead
Hero MotoCorp will announce its Q4 FY26 results on April 30, 2026, followed by an earnings call on May 6, 2026. Management forecasts double-digit industry growth for Q4 FY26 and high single-digit growth for FY27, driven by factors like GST benefits, strong rural demand, and urban spending. The company may also declare a final dividend for FY2025-26. Morgan Stanley maintains an 'Overweight' rating and has increased its price target to ₹6,537, confident in the automotive sector's growth cycle despite short-term issues. Investors will be watching closely to see if Hero MotoCorp can maintain market share and boost profits amid rising costs and competition, especially with the accelerating shift to electric vehicles.