PL Stock Report - Hero Motocorp (HMCL IN) - Event Update - Launch of a strong contender in premium space - BUY

Hero Motocorp (HMCL IN) - Himanshu K Singh - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: BUY | CMP: Rs3,030 | TP: Rs3,200

Event Update - Launch of a strong contender in premium space

Quick Pointers:

♦ Launch price surprised positively; HD brand image to help become a strong contender in premium segment.

♦ HMCL branded product on the same platform could provide fillip to volumes.

Launch of Harley Davidson (HD) X440 in India within three years of collaboration marks a significant milestone for HMCL and HD itself. The bike commands good road presence and is a strong contender in premium segment given 1) its urban styling plus distinctive signature elements, 2) best-in-class performance, 3) HD brand image and 4) competitive pricing. HMCL plans to launch another premium bike based on the same platform and engine family. Hero branding bike will have more competitive pricing compared to X440 and would also benefit from association with HD brand image, thereby, helping to gain substantial share in the premium market, in our view. However, we have also seen HMCL’s good product launches who failed to find success in the market. Thus, successful execution of plans and strategies in premium categories is critical.

We believe that HMCL is moving in the right direction and re-rating is possible if it can make in-roads in premium segment. The company trades at c15x PE multiple, more than c30% discount versus its peers’ average. Performance of X440 could act as overhang for Eicher Motor’s stock performance, which could be the biggest loser from success of X440. Maintain ‘BUY’ rating with a TP of Rs 3,200 at 15x Mar-25E standalone EPS (Rs 87 for Fincorp and Rs 78 for Ather).

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