HEROMOTOCO - Hero MotoCorp Limited Share Price

Management Outlook and Major Points:
Hero MotoCorp's management outlined a positive outlook driven by strategic priorities under their 2030 vision: Grow the Core, Win in Premium, Build EV Leadership, and Diversify Revenue Streams, supported by operational pillars like ESG leadership and organizational agility. Key highlights:

1. Financial Performance:

   • Q3 FY25 revenue grew 5% YoY to Rs.10,211 crore, with EBITDA up 8% (Rs.1,476 crore) and PAT rising 12% (Rs.1,203 crore).
   • Record parts/accessories revenue (Rs.1,555 crore, +9% YoY) and ICE EBITDA margins at 16% (14.5% overall after EV investments).

2. Market Share & Growth:

   • Gained 520 bps QoQ market share (32.8% overall), led by 125cc, EVs, and Global Business.
   • Expect to outpace industry growth via rural/urban recovery, premiumization, and 125cc expansion.

3. Product Launches:

   • Premium: Launched Xtreme 250R (fastest 250cc) and Xpulse 210.
   • EVs: VIDA V2 Series (including sub-Rs.1 lakh V2 Lite) to target mass segments.
   • Scooters: Destini Full Body, Xoom 125/160 (liquid-cooled engines) to enhance urban appeal.

4. EV Strategy:

   • Focus on scaling VIDA via affordability, geographic expansion, and charging infrastructure. Transitioning to PLI-compliant models in FY26.

5. Demand & Macro:

   • Rural demand recovery (+3% contribution in Q3) and tax reliefs (boosting disposable income) to drive consumption.
   • Double-digit revenue growth guidance for FY26.

6. Leadership Transition:

   • Vikram Kasbekar (new CEO from May 1) emphasized execution focus on premium, EV, and scooter segments.

Challenges: Managing EV transition costs, competitive pricing in new segments (e.g., Xoom 160), and NBFC delinquency pressures (Hero FinCorp).

Overall, Hero aims to leverage operating leverage, premiumization, and EV scale to sustain growth.

Question 1: What drove the strong growth in parts, accessories, and merchandise revenue in Q3, and is there seasonality impacting this segment?
Answer: The growth was attributed to Q3 seasonality and expanded product lines (e.g., tires, batteries, oils). The parts business maintains strong profitability, with rural distribution expansion and consistent execution driving growth.

Question 2: How does the pricing strategy for the Xoom 160 scooter balance profitability and market share, given its new category entry?
Answer: The Xoom 160 is priced competitively despite premium features (liquid-cooled engine, 14-inch wheels) to grow the 160cc scooter category. Hero aims to expand the segment while ensuring value through advanced specifications.

Question 3: How will income tax changes in the budget impact Hero's customer base, and what is their income profile?
Answer: Customers in Hero's entry segment (Rs.6"“12 lakh annual income) will benefit from higher disposable income due to tax relief, potentially boosting demand. The tax savings (Rs.40,000"“50,000/year) could cover EMIs, aiding rural and urban consumption.

Question 4: What caused the sequential improvement in material costs, and is it linked to reduced EV investments?
Answer: Lower EV investments during Q3 (due to model transition from V1 to V2) contributed to the margin improvement. Material costs remained stable, with per-unit EV investments unchanged despite temporary dispatch declines.

Question 5: When will Hero's EV portfolio become PLI-compliant, and how will this affect costs?
Answer: Hero is finalizing PLI compliance filings, with the full EV portfolio expected to meet norms in FY26. Cost optimization via localization and PLI benefits will enhance competitiveness without compromising growth investments.

Question 6: What is Hero's medium-term EV strategy, and what milestones define leadership in this segment?
Answer: Hero aims for EV leadership through aggressive product launches (including sub-Rs.1 lakh models), charging infrastructure expansion, and geographic reach. Profitability will be balanced with growth, leveraging PLI benefits and cost efficiencies.

Question 7: How will OBD-II Phase 2 norms impact pricing and production?
Answer: Compliance will raise prices by 1"“2% due to hardware upgrades. Hero's transition is complete, with no carburetor models affected. Industry-wide, carburetor-to-FI shifts could increase costs for competitors.

Question 8: Why did ICE margins contract in Q3 despite higher parts revenue?
Answer: Margins dipped due to festive-season marketing spends for power brands. This is a seasonal effect, with normalization expected in subsequent quarters.

Question 9: What are Hero's plans to revive the HF Deluxe brand and 100cc segment?
Answer: Hero will focus on affordability (financing solutions), value augmentation, and rural penetration to grow the 100cc category, leveraging its market leadership and customer outreach programs.

Question 10: Are structural shifts in consumer preference (toward scooters/EVs) affecting motorcycle demand?
Answer: No structural shifts are observed. Hero attributes motorcycle segment softness to affordability challenges, not preference changes. Scooter launches (Destini, Xoom) and rural-focused strategies aim to regain momentum.

Question 11: What is the growth outlook for FY25 and beyond?
Answer: Hero projects double-digit revenue growth for FY25, continuing into FY26. Rural demand recovery, premium/EV expansion, and stable financing conditions support this outlook.

Question 12: How is Hero addressing EV volume declines post-Diwali?
Answer: Temporary dispatch dips were due to V1-to-V2 transition. Volumes are rebounding as channels restock, with market share recovery expected by March. New launches and expanded retail networks will drive growth.

Question 13: How is Hero FinCorp's loan book performing amid rising delinquencies?
Answer: Hero FinCorp's loan book grew 13% YoY, but personal loan delinquencies raised credit costs. Collections are improving, with a focus on recovery to stabilize profitability. Third-party lenders remain active despite sector-wide stress.