On Friday, UBS analyst adjusted the price target on Hero MotoCorp Ltd. (HMCL:IN) to INR3,450.00, up from the previous INR3,000.00, while reiterating a Sell rating on the stock. This change comes amid observations of the company's performance in the competitive Indian two-wheeler (2W) market.
The analyst noted that despite Hero MotoCorp's most aggressive launch cycle in calendar years 2023-2024, the company continues to lose significant market share. The primary reason for this decline is attributed to the shift in consumer preference from the 100-110cc motorcycle segment, which has been Hero's stronghold, towards premium motorcycles, scooters, and electric vehicles (EVs).
Furthermore, the analyst pointed out that even with multiple product launches, Hero MotoCorp's market shares in the premium, scooter, and EV categories remain exceptionally low. The company's stronghold in the 100-110cc motorcycle market is being eroded as customers transition to more premium products and EVs.
Despite the challenges faced by Hero MotoCorp, including the long-term risks posed by electrification and doubts about its ability to diversify, the stock has experienced a re-rating recently. This uptick in the company's stock value is partly based on the expectations of a rural recovery and the success of new product launches.
The UBS analyst concluded that the re-rating of Hero MotoCorp's shares has led to their trading at approximately 2.4 standard deviations above the company's five-year average. This is in light of the anticipation of a rural market recovery and optimism surrounding the company's new launches.
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