Motilal Oswal hosted the senior management of Hero MotoCorp – Dr Pawan Munjal, Chairman, Managing Director and CEO, and Niranjan Gupta, CFO. Motilal Oswal discussed the road ahead for 2-Wheelers, its strategy, and roadmap for electrification. Hero MotoCorp is in a sweet spot as strong rural-led recovery plays to its strength in the economy-executive category in the Motorcycles segment. With an apt product portfolio for the rural market, the highest brand recall and a strong distribution network, it is best placed to benefit from low penetration and ongoing momentum in the rural economy. Motilal Oswal values Hero MotoCorp at 18x Dec’22 EPS to factor in improved volume visibility and lower risk of value outflow from Hero MotoCorp areas of strength. Maintain Buy rating with a target price of Rs 3750/share.

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Hero MotoCorp has a clear and solid focus on premium Motorcycles, Scooters, and exports. In these three areas, there are steep internal targets for market share/volume contribution. It is focused on achieving its targeted market share in these categories and has a strategy in place to attain this profitably. It is already inching up its market share in Scooters and premium Motorcycles. One of the biggest differentiators for Hero MotoCorp during these COVID-19 times has been its range of new products in these areas.

New premium products are doing very well and helping it improve its market share. Extreme 160R, New Passion Pro, variants like Glamour, Blaze and Pleasure Platinum have become volume drivers and improved its presence in urban markets. In the global business, it has put in place infrastructure and a market-specific product strategy is being executed. It has set huge targets of achieving a certain contribution of volumes from exports, as a percentage of total volume coming in from the global market.

Hero MotoCorp has recently entered into a partnership with Harley-Davidson for:

a) distribution of Motorcycles, parts, and official merchandise,
b) design, development, and manufacture of a range of motorcycles to be sold under the latter’s brand. This is a huge and massive endorsement of its R&D and manufacturing capabilities.

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In Harley Davidson’s 117 year history, this is the first time they have granted such a license to anyone. All the concerned teams are actively working towards a smooth transition for the customers, while simultaneously building plans for coming years. Hero MotoCorp has already onboarded nearly a dozen Harley Davidson dealers (from its existing dealer pool) and the process of integration is going on. It will start distributing Harley Davidson’s products from Jan’21. Hero MotoCorp already has designs on the drawing board and has started working with Harley Davidson. It is a couple of years away from production and sales of Hero MotoCorp designed Harley Davidson products.

2-Wheelers penetration levels in India are still very low relative to some other markets (like China). Unlike some countries, where customers move directly to 4Ws, India would first move to 2Ws on motorized transport.