Hero MotoCorp: Steady performance to continue; in fair value zone

Research evidence excerpt

Global Markets Research

Hero MotoCorp HROM.NS HMCL IN

7 August 2026

EQUITY: AUTOS & AUTO PARTS

Steady performance to continue; in fair value zone

Rating

Remains

1Q ahead of estimates; motorcycle industry growth may be

much slower where HMCL is over-indexed

Target price

Increased from

INR 5,783

INR 6,124

Closing price

6 August 2026

INR 5,551

Implied upside

+10.3%

1QFY27: EBITDA margin ahead of estimates at 13.3% (Nomura: 12.8%, consensus: 13.1%)

HMCL’s 1QFY27 revenue came in at INR130bn, up ~36% y-y (Nomura estimate: INR123.4bn,

consensus: INR124.5bn; Fig. 1 ). ASP was at ~INR77.4k, +4% q-q (Nomura: 73.5k). EBITDA

margin came in at 13.3%, ahead of our (12.8%) and consensus (13.1%) estimates. RM/sales was

up 300bp q-q to 71.5% (Nomura: 70.5%), which was offset by lower other expenses/sales at 9.9%

(Nomura: 11.2%). Staff costs/sales was flat at 5.4% (Nomura: 5.5%). Thus, PAT was up 29% y-y.

Management commentary – Demand: Expects close to double-digit growth for the industry

in FY27E. Higher scooters, EV and premium mix contributed 8% ASP y-y growth. Spares grew

30% y-y. Exports: Plans to maintain strong growth. Inventory: 6 weeks. New launches: Vida

new launches and capacity expansion (to 45k by end-FY27E from 30k) to boost sales.

Scooter capacity will also be increased from 65k to 130k. Flex fuel range of the Splendour and HF

launched. Plans to launch EV motorcycles in FY28E. HF price cut boosted volumes. Margins:

commodity impact 450bp in 1Q. Marginal rise in costs seen in 2Q which can be mitigated by cost

initiatives. Price hike: 4.5% in ICE since Feb-July, and double-digit in EVs. Margin guidance

remains 14-16% in mid-term but not short term. EV loss: INR2.3bn in 1Q. Financing: 64%(vs

58% q-q).

Our view: We expect HMCL’s total volumes to grow by 6%/5%/4% in FY27/28/29F. Cost

pressures should get passed on over time given the space created by the GST cuts. EV margins

may benefit from BOM cost reduction and PLI approvals (50-70bp potential), which will likely

support margins. HMCL is making good progress in EVs and scooters (12% mix) but domestic

motorcycles contribute 83% to volumes where growth should be much slower (3-5%). Within that

…