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Motilal Oswal
Target: ₹3,900
CMP: ₹2920.00
Hero MotoCorp (HMCL) is in a sweet spot as strong rural-led recovery plays to its strength in the economy-executive category in the motorcycles segment. With an apt product portfolio for the rural market, the highest brand recall, and a strong distribution network, it is best-placed to benefit from low penetration and ongoing momentum in the rural economy.
HMCL’s competitive positioning has improved in both the 100cc and 125cc categories post BS6. This is attributable to the narrowing of the price differential in the economy segment (vis-à-vis Bajaj Auto’s CT100) and product upgrades in executive 125cc. This would enable further recovery in market share in FY21 - signs of recovery are visible YTD.
HMCL has a very weak presence in other segments such as scooters, premium motorcycles and exports, which contribute over 55 per cent to the two-wheeler industry. It has just 5 per cent market share in these segments. Learning from its lack of success, it has course-corrected in each of these segments and is returning with renewed strategy.
If HMCL turns second-time lucky in either of these segments, it could potentially add another volume driver, in turn supporting the core portfolio. We see initial signs of acceptance for HMCL’s products in the market in all these three segments.
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