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Goldman Sachs has adjusted its outlook on Hero MotoCorp Ltd. (HMCL:IN), reducing the price target to INR4,150 from INR4,250, while maintaining a Sell rating on the stock.
The revision follows Hero MotoCorp's first-quarter performance, which fell short of expectations. The company's gross margin was reported at 32.3%, a 0.5 percentage point drop below the consensus on Bloomberg.
A Goldman Sachs analyst noted that Hero MotoCorp's average selling price (ASP) decreased by 3% quarter-over-quarter, attributing the decline to a reduced revenue share from spare parts. In contrast, the year-over-year ASP increase of 3% lagged behind competitors Bajaj Auto and Eicher, which saw increases of 7% and 11%, respectively.
This is despite Hero MotoCorp's shift towards more premium products such as Harley Davidson, Mavrick, Karizma, and Xtreme 125.
Further analysis by Goldman Sachs highlights a concerning trend for Hero MotoCorp, where retail volume growth has consistently fallen behind wholesale volume growth for the past four quarters.
The discrepancy ranged from 4% to 16%, suggesting a potential build-up of channel inventory. This observation comes ahead of the festive season, which begins in the second quarter of 2025, with July's wholesale volumes already showing a 5% year-over-year decline.
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