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Axis Securities
Hero MotoCorp (Buy)
Target: ₹3,300
CMP: ₹2,943.30
It is present in both the motorcycles and the scooter segments, with a market share of nearly 48 per cent and 10 per cent respectively. Motorcycles form the major chunk of Hero’s revenues, contributing about 90 per cent to total volumes, while the balance is contributed by Scooters. Hero is a domestically focused company with about 97 per cent of volumes derived from the Indian market.
Hero is well placed to benefit from the demand revival post Covid 2.0 in light of rural economic recovery, and enhanced need for personal mobility over the shared mobility. While the rural economy was well-insulated from the first Covid-19 wave last year, it witnessed a higher adverse impact of Covid 2.0. However, going forward, we expect to see a healthy revival in rural demand led by the expectation of a good monsoon, healthy reservoir levels, MSP growth, and higher procurement from the government.
Hero is best-placed to benefit from this expected revival in the rural economy (50 per cent of the company’s domestic volumes are derived from rural India) considering its apt product portfolio, strong brand recall, and robust distribution network. q Renewed focus on Premium Motorcycles and Scooters: Hero has aggressively launched a slew of products in the scooters and premium bikes segments over the past two years.
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