Shares of Hero MotoCorp Ltd made considerable strides on Friday morning, surging nearly 3% upsurge on the National Stock Exchange following a strong May sales performance that outpaced analyst forecasts. This is on a day when the benchmark Nifty 50 index is flattish.
The Indian two-wheeler manufacturer reported a 7% year-on-year increase in its May wholesale volume to 519,474 units. Analysts at Motilal Oswal Financial Services estimated the company to clock 418,565 units.
The auto company’s growth was in line with the overall strong show in the two-wheeler sector in May, partly fuelled by the ongoing wedding season.
Nonetheless, the recent volume still lags about 20% behind May 2019’s pre-pandemic level, with a sluggish rural market contributing to the deficit. Given Hero’s primary foothold in the entry-level segment, this shortfall is significant.
As such, it augurs well that the company is streamlining its efforts to launch new products in the premium segment. Hero expects to continue the momentum seen in May led by an uptick in consumer sentiments, forecast of normal monsoon and expansion in premium segment.
Jefferies India analysts note that Hero continued to gain market share in May. The 2W retail market share in April and May stands at 33% and 36%, respectively. In FY23, the metric was about 32%, they said.
Meanwhile, given the recent announcement of reducing the electric 2W subsidy cap, the quantum of price hikes the company would take is a key factor to watch. Currently, Hero has a very minimal market share in the electric 2W segment. It aims to cover 100 cities in 2023 with its electric vehicle, Vida.
It remains to be seen if the demand momentum sustains post the wedding season. As things stand, there are no clear signs of revival in rural demand yet. It goes without saying that a sustained recovery in volume would keep investor sentiments intact.
For now, investors seem to be capturing the brighter picture adequately. Hero’s shares are hovering near their 52-week highs of Rs2938.60 apiece seen in August.
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Updated: 02 Jun 2023, 11:46 AM IST