Hero MotoCorp Ltd. (HMCL: IN) saw a positive shift in market outlook as Incred Research changed its stance on the company's stock, upgrading it from Hold to Add. This adjustment comes with a significant increase in the price target, now set at INR 5,812.00, up from the previous INR 4,766.00.
The revision is grounded in the anticipation of a revival in festive demand for two-wheelers, which are viewed as a strategic play in the current market. The analyst from Incred Research highlighted the potential for high-teen growth in the domestic two-wheeler (2W) segment, with Hero MotoCorp poised to benefit from this trend. The improvement in the rural market demand is a key factor contributing to this optimistic outlook.
Hero MotoCorp's recent launch of a new 125cc bike is expected to bolster the company's product lineup and strengthen its market position. Additionally, the valuation of Hero MotoCorp is considered comfortable as it stands above the 10-year mean level, offering further justification for the upgrade.
The analyst also noted that the threat from Bajaj Auto's introduction of CNG options for entry-level customers is low, which supports the positive rating. Furthermore, the potential initial public offering (IPO) of Hero Fincorp, a financing arm of Hero MotoCorp, is identified as a possible upside trigger. The financing division is valued at three times its FY24 price-to-book value (P/BV), suggesting additional value could be unlocked upon the IPO.
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