Street divided on Hero MotoCorp after analysts' meet; here's what to do with stock

Shares of Hero MotoCorp – India’s leading two-wheeler manufacturer – were near the flatline during Tuesday’s early morning session on the bourses in an otherwise positive market.

The stock dipped nearly 1 per cent to touch the day's low of Rs 2,909 per share on the BSE a day after the auto company’s analyst meeting on Monday.

Analysts meeting highlights

In an analyst meeting, the management, led by Niranjan Gupta – new Chief Executive Officer of Hero MotoCorp – highlighted its focus on changing gears by:

• Growing the core business
• Winning in the premium segment
• Building leadership in EVs.

The management also said it is upgrading its retail network to support its aspirations in the premium segment as well as in EVs (electric vehicle). It is being backed with annual investments of Rs 1,000 -1,500 crore, largely directed toward the premium segment and EVs.

The company maintained its EBITDA margin target of 14-16 per cent, supported by improving product mix, operating leverage, and cost-saving initiatives.

What should you do?

Most brokerages were divided on the stock after the analysts' meeting, among all CLSA downgraded the Hero MotoCorp shares to ‘sell’ from an ‘outperform’ call

CLSA downgraded Hero MotoCorp stock as it sees limited upside potential and believes the market share gains will remain a challenge due to high competitive intensity. Similarly, Morgan Stanely has an ‘underweight’ rating, Citi has a ‘buy’ call, and Nomura retains a ‘neutral’ stance on the stock.

Domestic brokerage firm Motilal Oswal is bullish on Hero MotoCorp after strong management commentary and business outlook, it maintains a ‘buy’ call with a target of Rs 3,500 apiece, implying 20 per cent upside potential as the company focuses on growing core and building premium brands.

Kotak Institutional Equities gives a ‘reduce’ call on the stock with a target of Rs 2,600 apiece as it sees that it will be challenging for Hero to gain meaningful share in the premium motorcycle and scooter segments, given weak brand positioning and strong customer affinity toward established brands.

Hero MotoCorp share price NSE: Past performance

Hero MotoCorp shares have gained nearly 13 per cent in the last one year as compared 18.5 per cent rise in the Nifty50. So far this year, the stock rose about 7.5 per cent against around 3 per cent surge in the benchmark index.

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