Buy Hero MotoCorp; target of Rs 6450: Choice Institutional Equities

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Premiumisation and favourable mix: HMCL's revenue grew 21% YoY, supported by 10.5% volume growth, premiumisation, and favourable product mix, with the 125cc portfolio growing 19% in H1FY27.
  • Scooters, EVs, exports, and capacity expansion: ICE scooter dispatches grew 34% YoY in Q2FY27, with H1 growth exceeding 50%, while VIDA retail volumes rose 74% YoY to 66,000 units, and export retail grew 19% YoY.
  • Margin recovery: EBITDA margin is expected to remain broadly stable in Q3FY27, supported by LEAP savings, cost rationalisation, calibrated pricing, and improving EV unit economics, with a medium-term EBITDA margin target of 14–16%.
  • Growth visibility: HMCL launched the Xtreme 160R and Xtreme 250R in October 2026 and expects 3–4 further premium launches during the remainder of FY27, with FY27 capex guidance remaining at INR 15,000 Mn.

Thesis Validation Checklist

  • Domestic growth: Watch for sustained market share gains, particularly in the premium segment, and the ability to maintain pricing power.
  • EV traction: Monitor VIDA's retail volume growth, market share, and progress towards achieving positive gross margins.
  • Export recovery: Track export wholesale growth, particularly in new markets like Brazil, Mexico, and Africa, to assess diversification efforts.
  • Margin expansion: Look for signs of cost control, operating leverage, and improving EV economics to support margin recovery towards the medium-term target.