Target: ₹5,560

CMP: ₹4,689.05

Hero MotoCorp (HMCL) posted an in-line operating performance in Q3. HMCL expects double-digit revenue growth for the industry in FY25 and aims to outperform the industry with new launches. It expects an uptrend in margins from hereon, owing to benign input costs and improving mix.

Demand outlook: Overall 2W industry revenue should grow in double digits in FY25 and HMCL expects to outperform the industry with its new launches, thereby implying market share gains. Industry growth is likely to be driven by the 125cc+ segment in FY25 as well.

Margins: ICE margins stood at 16 per cent in Q3. The margin impact of EV sales was high in Q3 (200 bps) due to the festive season and is likely to be at 100-150 bps in FY24. While input costs would remain stable, the management expects margins to be on a gradual uptrend with an improved mix.

We maintain our FY24 EPS but increase our FY25 EPS by 10 per cent to factor in better product mix and volume recovery. Reiterate our Buy rating on the stock with a target price of ₹5,560 (18x Mar’26E EPS + ₹235/₹198 for Hero FinCorp/Ather after 20 per cent holding company discount).