UBS, Morgan Stanley maintain bearish outlook on Hero MotoCorp post Vida V2 launch

Brokerage UBS has reiterated its "Sell" rating on Hero MotoCorp, setting a target price of Rs 3,430, implying a potential downside of 25 per cent from the current market price.

The report comes after Hero MotoCorp unveiled its new electric scooter lineup, Vida V2, featuring variants priced between Rs 96,000 and Rs 1.35 lakh (ex-showroom).

While UBS acknowledged that the lower price point of the Vida V2 could help Hero MotoCorp capture market share, it warned that competitive pricing might deepen losses. “The electric vehicle (EV) space is seeing intense competition, with multiple launches expected from original equipment manufacturers (OEMs) in the coming quarters,” UBS noted.

MS highlights challenges in re-rating prospects

Morgan Stanley (MS) has maintained its "Underweight" rating on Hero MotoCorp, with a target price of Rs 4,110. The brokerage believes that while the Vida V2 lineup is well-priced, sustained market share gains in the electric two-wheeler segment will be critical for any re-rating.

The firm pointed out that EVs constituted 6 per cent of the two-wheeler market in November 2024, with traditional OEMs like Hero MotoCorp gaining share at the expense of startups. However, it expressed concerns over the competitive landscape and aggressive pricing strategies, which may pressure profitability.

Market performance and recent challenges

Hero MotoCorp’s stock traded flat at Rs 4,639 on the NSE as of 2:15 pm on Thursday. The company recently reported a 5.4 per cent year-on-year decline in sales for November 2024, with 4,59,805 units sold compared to 4,91,050 in November 2023.

Despite short-term challenges, the stock has delivered strong returns over the long term, gaining 22 per cent in the last year and 88 per cent over three years. However, its sales performance, coupled with rising competition in the EV space, has prompted cautious stances from analysts.

Outlook: Gains hinge on execution

Both UBS and MS emphasize that Hero MotoCorp’s ability to navigate pricing pressures and gain traction in the EV market will determine its future trajectory. Investors should tread carefully given the mixed signals from the company’s sales data and competitive landscape.