Hero MotoCorp rallies 5% on good retail sales in festive season

Analysts remain positive on the stock and see increased visibility for Hero MotoCorp to deliver reasonable earnings growth.
Shares of Hero MotoCorp rallied 5 per cent to Rs 3,136 on the BSE in the early morning trade on Thursday after the two-wheeler giant said it sold more than 14 lakh units of motorcycles and scooters in retail sales during the festive season. The stock hit a 52-week high of Rs 3,394 on October 16, 2020.

“The riding on robust customer demand for its range of products, Hero MotoCorp - the world’s largest two-wheeler manufacturer - sold more than 14 lakh units of motorcycles and scooters, in retail sales during the just-concluded festive season, thereby continuing to gain market share and strengthen its leadership,” the company said in a press release. The festive season also witnessed strong customer preference for Destini and Pleasure scooters, resulting in high double-digit growth for the two models, it said.

Despite the severe disruptions on account of the Covid-19 this year, the good retail off-take during the 32-day festival period - spread between the first day of Navratra and the concluding day after Bhai Duj – was 98 per cent of the festive season volumes sold by the Company in the previous year (2019) and 103 per cent compared to the same period in 2018, the company said.

On the outlook, the company said the news on the rapid development of Covid-19 vaccines is likely to enable a faster rebound of the global economy in the coming months. The slew of recent measures announced by the Government should also help accelerate recovery and aid core sectors to rebound fast, it said.

Analysts remain positive on the stock and see increased visibility for Hero MotoCorp to deliver reasonable earnings growth (20 per cent CAGR over FY21-23E) led by market share gain and margin expansion.

Analysts at Dolat Capital expect the trends of relative strength in the rural economy, shift from shared to personal mobility, and down-trading; to be prominent in the near to medium term. In our view, Hero is best positioned to benefit from all of these trends as the company has a strong product portfolio in entry and executive segments with more than 60 per cent shares, deep rural/semi-rural network reach (rural contributes to 50 per cent volume).

The recent Tie-up with Harley Davidson (HD) will also help to accelerate and enhance premium segment strategy in the longer run, the company to develop a range of products for Harley (HD), the brokerage firm said.



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