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On Monday, Nomura/Instinet analysts downgraded Hero MotoCorp (NSE:HROM) Ltd. shares, moving their recommendation from "Buy" to "Neutral." The revised price target is set at INR 4,594.00, a decrease from the previous target of INR 5,805.00. The downgrade follows the company’s third-quarter financial results for the fiscal year 2025, which showed a revenue increase of approximately 5% year-over-year to INR 102.1 billion. This revenue figure slightly missed Nomura’s expectation of INR 102.5 billion but surpassed the consensus estimate of INR 101.2 billion.
Hero MotoCorp’s average selling price (ASP) for the quarter was roughly INR 69.9 thousand, marking a 1.3% increase from the previous quarter and aligning with Nomura’s projection of INR 70k. The EBITDA margin was reported at 14.5%, which is higher than both Nomura’s forecast of 14.0% and the consensus of 14.2%. A reduction in raw material costs as a percentage of sales to 65.8% contributed to this margin, which was better than the expected 66.8% by Nomura.
The company’s EBITDA saw an 8% year-over-year increase, and profit after tax (PAT) rose by 12%, supported by a higher other income. Management provided insights into their expectations and strategies for the coming fiscal years, outlining plans to achieve double-digit revenue growth in FY25/26. They noted that rural market growth is outpacing urban areas and anticipate an overall demand improvement starting from February. Hero MotoCorp expects to grow faster than the industry average.
The management’s commentary also highlighted the positive impact of income tax cuts for customers in the INR 600k-1.2 million income bracket. Inventory levels at the end of the third quarter were reported to be at six weeks, which is consistent with the second quarter’s range of five to six weeks. Additionally, Hero MotoCorp is gearing up for new product launches, including scooters like the Destini 125, Xoom 125, Xoom 160, and Vida V2; as well as motorcycles such as the Xtreme 250R, XPulse 210, and Vida V2, which are expected to contribute to the company’s growth trajectory.
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