Hero MotoCorp Ltd (HMCL) has been the best-performing auto stock over the last three months, gaining over 17 per cent during this period.
Multiple tailwinds, especially on the rural front, are expected to boost its volumes.
In addition to the demand drivers, new launches too should help drive growth both in the commuter and premium motorcycle categories.
However, given competitive pressures, the company has been losing share to competitors in the mid- to premium segments.
In addition to this, what could put near-term pressure on HMCL’s sales are the new norms related to anti-lock braking system (ABS) to be implemented for motorcycles with a capacity under 125 CC.
Given the positive and negative triggers, analysts have mixed views on the outlook of the company.
For HMCL, and the two-wheeler sector, there are multiple triggers, which should help it to post a mid-to-high single-digit growth for 2025-26 (FY26).
Geojit Securities believes that HMCL is poised for growth, fuelled by decreasing inflation, reduced interest rates and tax cuts, along with a promising monsoon season.
The wedding season in May and June is expected to boost demand.
To capitalise on this demand, the company plans to introduce market-specific products, overhaul its distribution network, and enhance its brand presence in key markets, says the brokerage.
Geojit has a “buy” rating on the stock, with a target price of Rs 4,865.
In the fourth quarter of FY25, the company launched multiple products across segments, reinforcing its focus on both commuter and premium motorcycles, says Axis Securities.
The company launched Splendor+ XTEC 2.0 and updated its commuter lineup with the 2024 Hero Glamour.
In the premium segment, it introduced the Xtreme 250R and Xpulse 210 at Bharat Mobility 2025, along with the Mavrick 440 Thunderwheels and the Xpulse 200 4V Dakar Edition.
The company also launched the new Destini 125 and Xoom 125, as well as 160 models.
These launches highlight Hero’s ongoing efforts to strengthen its product portfolio and address a wider range of customers, points out Shridhar Kallani of Axis Securities.
The brokerage also expects overall profitability in electric vehicles (EVs) to improve with localisation, cost reductions, and production-linked incentives (PLI)-related benefits.
The management projects EV break-even at 25,000-30,000 units per month from the current 7,000-8,000 units per month.
The company, which ended the year with an EV market share of 7 per cent, has acquired a 34.1 per cent stake in Euler Motors for Rs 510 crore, marking an entry into the EV three-wheeler (e3W) sector.
The e3W market is valued at Rs 17,000 crore, and is expected to grow to Rs 22,000 crore over the next five years, with operating profit margin potential of over 20 per cent.
The new ABS regulations are, however, a negative for HMCL.
The company is likely to increase vehicle prices by Rs 3,000 and impact-pricing by 3-5 per cent, says Nomura Research.
The domestic two-wheeler industry volumes may be impacted by 4 per cent, say Kapil Singh and Siddhartha Bera of the brokerage.
About 79 per cent of HMCL’s revenue is exposed to the move and this is the highest for the listed two-wheeler makers.
The other worry is the decline in overall market share for HMCL.
While the industry trend has been weak, with sector sales falling 10 per cent year-on-year (Y-o-Y) for the first two months of FY26, the decline in the case of HMCL has been sharp, with volumes falling by 22.7 per cent.
Kotak Securities points out that the company has a weaker presence in scooter and premium motorcycle segments (higher growth segments), which remains a cause for concern.
While the company has done well to manage its profitability, its efforts to arrest the market share decline have been limited, says Rishi Vora of the brokerage. Kotak Securities has a “sell” rating on the stock, with a target price of Rs 3,500.
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