Hero MotoCorp gears up for strong growth led by product mix, EV push

For one, a richer merchandise premix contributed to a 4.6% year-on-year maturation successful the company’s mean realization, reaching ₹68,373. Sales measurement surged 9.6%, driven by a 10.3% summation successful motorcycles, which made up 93% of full volumes, with the remainder coming from scooters. Consequently, wide gross maturation stood astatine 14.6% successful Q4, totalling ₹9,519 crore.

Additionally, little earthy worldly costs facilitated an Ebitda (earnings earlier interest, taxes, depreciation, and amortization) borderline enlargement of astir 130 ground points to 14.3%, contempt the antagonistic interaction of electrical conveyance (EV) related spending. Effectively, this meant implicit Ebitda maturation astatine 25.5% was faster than gross growth.

For Hero Moto, the caller fiscal twelvemonth has begun connected a beardown note, mounting the signifier for double-digit gross maturation for FY25. In April, measurement maturation stood astatine astir 35%, bolstered by wedding play demand. 

Factors that are expected to assistance maturation this twelvemonth see beardown home request from municipality and agrarian areas, arsenic good arsenic upcoming merchandise launches and enhancements to the organisation network. 

The absorption is optimistic astir the gradual betterment successful agrarian markets, peculiarly fixed the mean monsoon forecast for FY25.

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With its beardown beingness successful the 100-110cc segment, Hero Moto stands to payment the astir from immoderate rebound successful agrarian market. Furthermore, its existing merchandise premix is little susceptible to the menace of EVs, arsenic lone 7% of its income travel from scooters, and its halfway 100cc motorcycles are little apt to beryllium displaced by EVs.

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Having said that, Hero is actively expanding its EV portfolio, with caller launches expected successful the archetypal fractional of FY25. Notably, Hero ranks 2nd lone to Ola Electric successful the EV marketplace successful India.

The company’s differentiated absorption connected premiumization should besides thrust profitable growth. Additionally, Hero aims to boost volumes and grow its marketplace stock with caller merchandise launches successful the foreseeable future, having earmarked a superior expenditure of ₹1,000-1,500 crore for FY25.

Motilal Oswal Financial Services expects Hero Moto to present a measurement CAGR of 9% implicit FY24-26E, driven by caller launches successful 125cc, scooters and premium segments; a ramp-up successful exports. “Hero Moto volition besides payment from a gradual agrarian recovery, fixed beardown marque equity successful the system and enforcement segments," said Motilal’s analysts.

Meanwhile, station Q4 results, Hero’s shares are up astir 7%, taking the gains truthful acold successful 2024 to astir 16%. 

Going forward, investors should beryllium cautious of imaginable slower-than-anticipated maturation successful home two-wheeler request and abrupt increases successful commodity prices, which could interaction profitability.