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Investing.com - Investec (LON:INVP) has raised its price target on Hero MotoCorp (NSE:HROM) Ltd. (HMCL:IN) to INR4,400 from INR4,210 while maintaining a Hold rating on the stock.
The price target adjustment follows Hero MotoCorp’s Q1FY26 EBITDA of Rs 13.8 billion, which aligned with Investec’s estimates. The company’s gross margins expanded by 100 basis points year-over-year, driven by a richer product mix and improved realizations, though overall EBITDA margins remained flat at 14.4% due to negative operating leverage and higher losses in the EV segment.
Hero MotoCorp management has reaffirmed its industry growth guidance of 6-7% year-over-year for FY26, with most growth expected during the festive season. The company aims to gain market share across categories through new launches, including a new 125cc model and Harley launch planned before the festive season, product alterations in the Xtreme 125cc line, distribution footprint expansion, and increased marketing expenditures.
In the electric vehicle segment, management indicated that new launches are receiving positive traction, though supply constraints for rare earth magnets remain a concern. The company has secured supplies through Q2 and is working on alternatives to address this challenge.
Investec notes that while industry growth momentum is expected to improve, Hero MotoCorp’s growth trajectory may be muted due to renewed competition from Bajaj and Honda (NYSE:HMC), which are launching new products across commuter and premium categories, and recent ABS norms that could dampen demand in the commuter segment, which represents approximately 70% of Hero’s volumes.
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