Hero MotoCorp is is undoubtedly the biggest two-wheeler manufacturer in India, as well as in the global market too. Hero MotoCorp has eight globally benchmarked manufacturing facilities, including six in India (Dharuhera, Chittoor, Gurugram, Haridwar, Neemrana, Gujarat) and one each in Colombia and Bangladesh.

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Hero MotoCorp grabbed 37.04% market share in FY2021 despite 10.1% sales decline. Hero MotoCorp has announced it has entered a strategic partnership with Taiwanese electric scooter manufacturer Gogoro to tap into India’s nascent EV two-wheeler space, says Anand Rathi.

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Sharekhan says Hero MotoCorp has renewed focus on gaining market share in the premium bike segment and increasing exports capability. Its partnership with Ather Energy and Harley Davidson will help Hero increase its presence in new technology and premium segment bikes. Sharekhan expects a strong recovery in FY2022, driven by normalisation of economic activities, operating leverage, price hikes and cost-savings under the company’s leap programme, which would drive up margins. Sharekhan expects Hero MotoCorp to reach its historical margin range of 14%-16%.

Sharekhan interacted with the management of Hero MotoCorp (Hero) to discuss its plans for electric two-wheelers and readiness to benefit from increasing electric two-wheelers penetration in the medium to long term. Hero MotoCorp is also planning to launch its own developed mass scale e-2W in FY2022. Hero is well positioned to acquire or partner with new ventures in the EV space to scale businesses through its network and improve quality through its capable R&D division.

Hero MotoCorp’s R&D centre in Germany will focus on primarily two products – building a premium bike portfolio and developing EV products. Sharekhan believes the structural growth drivers for the two-wheelers (2W) industry remains intact. Hero is expected to benefit from premiumisation of products, its stronghold in the economy and executive motorcycle segments, and aggressive products offerings in premium bike and scooters segments, says Sharekhan.

Hero has strong reach in semi-urban and rural areas, aided by its largest distribution network in the 2W industry. Hero’s brand equity is because of value-for-money products, extensive service centres, low maintenance cost and higher resale value. Hero MotoCorp has renewed focus on gaining market share in the premium bike segment and increasing exports capability. Its partnership with Ather Energy and Harley Davidson will help Hero increase its presence in new technology and premium segment bikes. Sharekhan expects a strong recovery in FY2022, driven by normalisation of economic activities, operating leverage, price hikes and cost-savings under the company’s leap programme, which would drive up margins. Sharekhan expects Hero MotoCorp to reach its historical margin range of 14%-16%. Hence, Sharekhan  says it has retained a Buy rating on Hero MotoCorp.

Hero MotoCorp Key Risks:

Success of rival products in the entry and executive bike segments can impact Hero’s market share in the segments. Moreover, if the second wave of COVID-19 intensifies, it can impact Hero MotoCorp’s sales.