Demand Recovery, Softening Material Costs To Drive Growth, Says Analysts

Demand recovery and softening of key raw materials prices to support Hero MotoCorp Ltd. growth in the coming years, analysts said.

Analysts see signs of revival in the two-wheeler demand as reflected in the retail sales of two-wheelers in October, which rose nearly 6% over the corresponding pre-pandemic period in 2019 and also witnessed significant sales growth in festival period.

The brokerages also took comfort from management’s commentary on softening raw material costs, which may lead to better margins in the second-half of the current fiscal and in the coming years.

The company’s consolidated net profit fell 8% year-on-year to Rs 688.4 crore in the quarter ended September, with the operating margin contracting to 11.9% from 12.7% last year.

The Splendor motorcycle-maker sold 14.28 lakh units during the quarter, slightly lower than the 14.38 lakh units sold over the same period last year. However, sales were 2.7% higher compared with the quarter ended June.

Shares of Hero MotoCorp were trading 0.1% higher at 12 p.m., compared with 0.16% rise in benchmark Nifty 50 on the NSE.

Of the 50 analysts tracking the company, 32 maintain ‘buy’, 10 suggest ‘hold’ and eight recommend ‘sell’. The average of the 12-month consensus price target implies an upside of 13.2%.

Here’s what brokerages had to say about Hero MotoCorp’s Q1 Results: