HEROMOTOCO - Hero MotoCorp Limited Share Price

Hero MotoCorp's management provided a positive outlook during the recent earnings call for Q4 FY'26, highlighting significant growth across various segments. Key highlights include achieving the highest ever quarterly revenue of Rs.12,797 crores in Q4, marking a 29% year-over-year increase. For the fiscal year, total revenue reached Rs.46,830 crores with a growth of 15%, while EBITDA stood at Rs.6,871 crores, growing by 17%.

Management expects high single-digit volume growth for the two-wheeler segment in FY'27, with scooters anticipated to grow slightly faster than motorcycles. They have committed to a capital expenditure of over Rs.1,500 crores for FY'27 to further expand capacity, particularly doubling production for high-demand models like the Xoom scooter. In the EV segment, current capacity is projected to double within a few quarters, indicating strong momentum for the VIDA brand.

Management also addressed the rising commodity costs, estimating a Rs.2,100 per unit inflation for Q4 and confirming a calibrated price hike of approximately 2% to mitigate these effects. They maintained a medium-term margin guidance of 14% to 16%, emphasizing their commitment to expanding their EV, scooters, and premium segments while maintaining robust operational resilience despite current economic headwinds.

Major forward-looking points include:

• Planned significant investment in brand building, increasing advertising spend by 22% last year, continuing in FY'27.
• Multiple new product launches anticipated throughout the year, along with ongoing initiatives to enhance technology and connected vehicle capabilities.
• Planned establishment of a global parts center with an investment of Rs.700 crores, aimed at expanding parts and accessories business.

Overall, the outlook remains optimistic, stressing on their strategic investments to capture growth opportunities across emerging segments while continuing to navigate the evolving macroeconomic landscape.

Here are the major questions and detailed answers from the Q&A section of the Hero MotoCorp earnings call transcript:

1. Question: "Could you share your thoughts on motorcycle industry volume outlook that you expect and for yourself also for FY '27? And which will be the key models driving that growth?"

   Answer: "We expect high single-digit volume growth in FY '27, with scooters likely outpacing motorcycles slightly. Our focus will be on multiple new launches across commuter motorcycles and high-displacement bikes, including significant initiatives in our VIDA range. We're committed to outpacing the industry growth in both categories."

2. Question: "In the next few quarters, what is the quantum of headwind coming your way? What is the price hike taken? Are you hedged on some of these key commodities?"

   Answer: "It's challenging to provide specifics due to ongoing volatility in commodity prices. We have seen notable increases in costs and have initiated a calibrated price hike of about 2%. While there will be transitional margin pressures, we maintain our medium-term guidance of 14% to 16% margins, focusing on cost optimization and potential further price adjustments as necessary."

3. Question: "Do you think the EV losses have peaked out? Any comments on PLI and how the EV loss number might narrow as the year progresses?"

   Answer: "We're still in the build-out phase for our EV portfolio, planning significant R&D investments and capacity expansions. Our losses are reducing on a per-unit basis as we scale up our operations; PLI benefits should help enhance profitability, potentially covering investment costs while we ramp up our EV offerings."

4. Question: "Could you talk about the price hikes taken so far since the beginning of this year? Does it largely cover where the commodities are right now?"

   Answer: "We've implemented a price hike of approximately 2%, while commodity inflation has been much higher, in the high single digits. Although currently, the price adjustments do not fully offset the increased costs, we are offsetting this through other cost-reduction strategies."

5. Question: "Where do we plan to take EV capacity through the course of the year? Any updates on ICE scooter capacity?"

   Answer: "We're increasing ICE scooter capacity significantly, having already boosted Destini production by 50% and planning to double Xoom capacity soon. For EVs, we're set to enhance capacity by 50% shortly and plan for additional doubling later this year as demand continues to grow."

6. Question: "Any color or guidance on exports and where we see improvements?"

   Answer: "We're seeing strong traction in Latin America and expanding our presence in Africa and Bangladesh. We expect to maintain momentum from the past two years into FY '27, though logistics and global shipping challenges remain factors to navigate."

7. Question: "On the ABS and EPR regulations, what is the current status and potential future impact?"

   Answer: "For ABS, there have been no recent developments, and discussions are ongoing. Regarding EPR, it's still evolving within the industry, and we are assessing the potential impacts as regulations get finalized."

8. Question: "Can you share the export revenue for FY '26 in value terms and also current dealer inventory?"

   Answer: "In FY '26, our export revenue was around Rs.3,500 crore, with over 4 lakh units sold. Our dealer inventory stands at approximately 5 weeks, with EV scooter inventory remaining low reflecting our focus on capacity expansion."

9. Question: "What is your total R&D spend during the year, and how do you see that trending?"

   Answer: "While I can share detailed numbers offline, our R&D spend is trending upwards and is currently close to 2.5% of revenue. We plan to continue this increase in alignment with our growth strategies."

10. Question: "How do you see the growth pacing between the first and second halves of the year?"

    Answer: "We anticipate stronger growth in the first half due to base effects from last year, with the second half showing comparatively lower growth but contributing to overall annual progress."