HEROMOTOCO - Hero MotoCorp Limited Share Price

Hero MotoCorp's management provided a positive outlook for the company, sharing insights on economic growth, market trends, and robust financial performance. The company reported dispatches of 6.1 million units in the calendar year 2025, marking its 25th consecutive year as the world's largest motorcycle and scooter manufacturer. The Indian economy is projected to grow at 7.3% for 2026, supported by government initiatives, which is expected to further bolster demand in the two-wheeler industry, especially with retail growth of 21% year-on-year in January 2026.

The financial highlights for Q3 FY'26 include record revenue of INR 12,328 crores (up 21% YoY), EBITDA of INR 1,810 crores (up 23% YoY), and PAT of INR 1,349 crores (up 12% YoY) with a normalized PAT of INR 1,489 crores (up 20% YoY). The company's EBITDA margin improved to 14.7%, with a focus on higher average selling prices (ASP) which rose 4.2% YoY.

Management emphasized strategic growth initiatives in five key areas: scooters, premium motorcycles, global markets, EVs, and parts/accessories, where there exists considerable room for market share growth. With a strong customer response to new product launches and a robust supply chain strategy, Hero MotoCorp aims to maintain agility amid potential future disruptions.

Looking ahead, management anticipates the two-wheeler industry to grow by double digits in the current quarter and expects to outpace industry growth driven by their extensive product offerings and strategic marketing initiatives. They also expect growth to be broad-based across segments, including entry-level motorcycles and EVs due to increased interest from first-time buyers.

Here are the major questions from the Q&A section of Hero MotoCorp's earnings call along with detailed answers given by the management:

1. Question: "What insights can you provide on growth between urban and rural markets, particularly in the entry segment, considering recent volume volatility?"

   Answer: From a growth standpoint, both urban and rural areas are thriving due to GST benefits. Urban markets are advancing quicker due to improved income tax policies. However, rural markets peaked during the festive season, showing stronger demand than anticipated. We expect robust rural growth as wedding season approaches. The volume fluctuations in Q3 were partly due to earlier festives compared to last year, yet we foresee continued momentum into Q4.

2. Question: "What are your expectations for FY27 considering current growth trends?"

   Answer: We anticipate the industry to maintain a double-digit growth trend into FY27, building upon the solid momentum observed in Q3 and Q4. The growth may moderate slightly in the second half of the year due to a high base effect from this year. Overall, we foresee growth in high single digits for the upcoming fiscal year.

3. Question: "Could you elaborate on the commodity price inflation impacts during Q3 and your pricing strategies for Q4?"

   Answer: Commodity price increases affected margins by about 40-50 basis points in Q3. We have implemented a price hike of INR300 per vehicle from January to mitigate these rising costs. We're closely monitoring commodity prices and will adjust pricing as needed, given that market conditions remain favorable.

4. Question: "What is the progress on your electric two-wheeler offerings, especially in relation to competitors launching products under INR1 lakh?"

   Answer: Our VIDA lineup includes competitively priced variants, including some under INR1 lakh. We have introduced innovative solutions like Battery-as-a-Service to enhance affordability. This diverse offering caters to various customer needs and is expected to strengthen our market position in the EV segment.

5. Question: "What updates can you provide on your exports, particularly regarding growth in specific geographies?"

   Answer: Our exports have significantly increased, especially in Bangladesh and Colombia, where we've captured considerable market share. We're expanding into new regions, including Europe and various parts of Latin America and Africa, while also entering the Philippines. Our strategy focuses on strengthening our presence in high-growth international markets.

6. Question: "Given the recent strong performance, how do you view margin expansion and cost management moving forward?"

   Answer: We believe that growth will provide overhead dilution, facilitating margin expansion. Although we'll continue to face commodity cost pressures, our LEAP savings initiatives and ongoing focus on improving operational efficiencies will help maintain margins. We are confident that pricing adjustments will be judicious and not negatively affect overall demand.

7. Question: "How is the Colombian subsidiary performing after the previous impairment loss, and are any additional investments required?"

   Answer: The Colombian business has improved remarkably, achieving over 200% volume growth and becoming profitable this fiscal year. We've expanded our market share from 5% to 9%, and no additional investment is currently needed, as the business shows strong operational health.

These responses encapsulate the key discussions during the Q&A segment of Hero MotoCorp's earnings conference call.