Why Hero MotoCorp Share Price is Rising

Auto stocks have exhibited substantial strength throughout the year 2023.

The S&P BSE Auto index achieved an all-time high of 39,774.9 on 29 November 2023, showcasing a year-to-date return of 36.5% outperforming the benchmark Sensex, which delivered a 9% return.

This surge can be attributed to a confluence of factors, including heightened demand, favourable margin trends, and robust product cycles across various companies.

And of course, there's the electric vehicle megatrend, that's supporting the overall auto and auto ancillary sectors.

Among the auto stocks, Hero MotoCorp has particularly emerged as a standout, reaching a 33-month high and surging by an impressive 10% in just five days.

In the past one month, the stock is up around 23%. This kind of surge is considered extraordinary for a largecap stock.

Here's what is fuelling the rally in this auto stock.

#1 Record High Sales Milestone

Hero MotoCorp, the country's largest two-wheeler maker, has achieved its highest-ever festival retail sales, surpassing the 1.4 million unit mark during the 32-day festival period.

This reflects a 19% growth compared to the previous year, marking a significant milestone for the company.

The festival period, spanning from the first day of Navratri to Bhai Dooj, witnessed demand across rural markets and steady retail offtake in key urban centres.

Hero MotoCorp's performance exceeded its previous highest retail sales of 1.3 million units, achieved during the festival season of 2019.

Riding high on the success of the festival season, Hero MotoCorp has reduced its after-festival channel inventory to its lowest level in over three years.

The surge in the company's share prices can be attributed to this record-breaking retail achievement, fuelled by robust customer traction, and double-digit growth across various regions.

The combination of strong demand in rural markets and positive sentiments in key urban centres played a pivotal role in driving this retail sales record.

#2 Expansion in the Premium Segment

Hero MotoCorp's recent introduction of three premium stores and its ambitious plan to launch 100 such outlets by June 2024 are other notable contributors to the upswing in its share price.

The company's successful revamp journey in the initial 6-7 months further adds to its positive trajectory.

A significant development is the impending launch of a 440 CC platform in March 2024, with impressive booking figures of 25,000 for X440 and over 10,000 for Karizma.

Hero MotoCorp's commitment to upgrading 200 dealership outlets, opening three new premium stores, and 100 more premium stores by June next year underlines its strategic growth initiative.

The company is strategically focusing on enhancing the production of premium motorcycles and electric vehicles, coupled with an expansion of premium stores and charging infrastructure.

In terms of electric vehicle sales, Hero MotoCorp has seen a substantial increase, selling 1,924 units in October 2023, compared to 532 in September 2023, according to Vahan data.

Ather Energy, in which Hero MotoCorp holds a 37% share, reported the sale of 8,346 electric two-wheelers in October.

The company's production plans include initiating 10,000 units per month for both Karizma and Harley Davidson X440, with intentions to scale up further.

This expansion aligns with Hero MotoCorp's strategic goal of securing a significant market share and achieving success in its premium journey.

The ongoing rapid development of infrastructure, encompassing dealerships, cities, and charging stations, positions Hero MotoCorp for substantial growth, contributing to the positive sentiment reflected in the rising share prices.

What Next?

Looking ahead, Hero MotoCorp outlines a future vision encompassing the production of 10,000 units monthly for its premium EV, the Harley-Davidson X440, with intentions to further scale up operations.

The company's global expansion strategy includes entering new markets and setting up manufacturing facilities overseas.

Also, interest rates have peaked and inflation is coming under control due to a near normal monsoon.

With more than 50% of two wheelers being financed by banks and NBFCs, a decline in interest rates would drive more demand.

How Shares of Hero MotoCorp have Performed Recently

Hero MotoCorp share price is up 10% in five days, while over the month, the shares are trading higher by 23%.

Over the year, the shares of the company have gained 32%.

The company touched its 52-week high of Rs 3,884.5 on 30 November 2023 and its 52-week low of Rs 2,246 on 28 March 2023.

PFC is currently trading at a PE (Price to Earnings) multiple of 21.7x.

About Hero MotoCorp

Hero MotoCorp, formerly Hero Honda, is an Indian multinational motorcycle and scooter manufacturer based in New Delhi, India.

The company is the largest two-wheeler manufacturer in the world. In India it has a market share of about 46% in the two-wheeler category.

Hero MotoCorp has five manufacturing facilities based at Dharuhera, Gurugram, Neemrana, Haridwar, and Halol in the green field stage.

For more details about the company, you can have a look at Hero MotoCorp's factsheet and Hero MotoCorp's quarterly results on our website.

You can also compare Hero MotoCorp with its peers.

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