Hero MotoCorp Shares Scale New Peak on Strong Q2 Performance
India's leading two-wheeler manufacturer Hero MotoCorp witnessed massive buying interest during Monday's trading session, with its stock price climbing an impressive 4% to reach a fresh all-time high of ₹5,754 per share. This remarkable surge comes on the back of the company's outstanding September quarter results that have left brokerages overwhelmingly bullish about the company's future prospects.
Record-Breaking Financial Performance
The company delivered spectacular numbers for the second quarter, reporting a 24% year-on-year increase in consolidated net profit, which soared to ₹1,321 crore. Revenue followed suit with a healthy 16% growth, reaching ₹12,458 crore - the highest quarterly revenue in the company's history. The operational efficiency also showed significant improvement with EBITDA margins expanding by 55 basis points to settle at 15% for the quarter.
The sales volume told an equally compelling story, with motorcycle and scooter sales growing by 11% to reach 1.69 million units during the quarter. This growth was primarily driven by GST reductions on entry-level bikes and robust festive season demand. The domestic market remained strong with sales of 1.58 million units, representing an 8% annual growth, while international sales skyrocketed by 77% to 111,584 units, fueled by the company's strategic expansion into European markets.
Brokerages Turn Bullish with Revised Targets
The impressive quarterly performance has triggered a wave of optimism among leading brokerages. JM Financial maintained its 'Buy' rating while significantly raising its target price from ₹5,250 to ₹6,650. The brokerage attributed this upward revision to new product launches across both internal combustion engine vehicles and electric vehicles, along with improved operational efficiency. JM Financial has increased its volume estimates for FY26E and FY27E by 0.3% and 3% respectively, while raising EPS estimates by 1.6% and 4.8%.
Motilal Oswal also reinforced its confidence in the stock, retaining the 'Buy' rating with a target price of ₹6,500. The brokerage expects Hero MotoCorp to deliver a volume CAGR of approximately 6% over FY26-28, supported by new product launches and export market expansion. They particularly highlighted the company's potential to benefit from gradual rural recovery, given its strong brand presence in economy and executive motorcycle segments.
Adding to the positive sentiment, Morgan Stanley upgraded the stock to 'Overweight' with a target price of ₹6,471. The global brokerage firm believes that Hero MotoCorp's market share decline has bottomed out, pointing to significant gains in scooters, electric vehicles, and premium motorcycle segments. They noted that GST-led price cuts have successfully revived entry-level demand, with festive season volumes surging by 17%.
Strong Growth Outlook and Future Prospects
The company management expressed confidence in maintaining the growth momentum, citing strong post-festive demand and multi-year low inventory levels. Receivables have been substantially reduced to 12 days from 30 days, indicating improved working capital management. Realizations grew by approximately 4% year-on-year, supported by better product mix and pricing strategies.
Hero MotoCorp expects the domestic two-wheeler industry to grow by 8-10% in the second half of FY26, driven by multiple favorable factors including GST cuts, increasing first-time buyers, rural market recovery, good monsoon conditions, anticipated RBI rate cuts, income tax reductions, and controlled inflation. The company aims to outperform industry growth in both domestic and export markets through new product launches and geographical expansion.
The company has maintained its long-term EBITDA margin guidance of 14-16%, while Morgan Stanley projects margins to expand towards 15.3% by FY28, supported by improved product mix and reduced electric vehicle losses. The brokerage also noted that current valuations remain attractive at 16.8x FY27 P/E compared to industry peers, while the dividend yield above 3% provides additional support to investors.
