Hero MotoCorp’s latest results have triggered a bold ‘Buy’ Call from LKP Securities, with analysts Ashwin Patil and Rahul Deshmukh projecting a potential upside of 14% and a revised 12-month price target of Rs 5,304. Despite industry volatility and a weak Q1, LKP points to Hero’s decisive cost discipline, robust electric vehicle (EV) momentum, and an assertive foray into the premium two-wheeler segment as factors that keep India’s motorcycle giant firmly in pole position.

EV Acceleration and Premium Push Remain at the Core

Hero MotoCorp’s Q1 FY26 results showed resilience amid turbulence. Revenue dipped 5.6% year-on-year to Rs95,789mn, reflecting a temporary production pause and broader sectoral headwinds. However, stable EBITDA margins, gains in market share—especially in electric vehicles—and disciplined cost management signal underlying strength. The launch of the VIDA VX2 and partnership with Harley-Davidson reinforce Hero’s twin-engine growth model, while upcoming products and an expanded network hint at medium-term outperformance. LKP’s recommendation rests on sustained margins, product innovation, and strategic cost optimization.

Key Investment Thesis and Price Target

LKP Securities recommends a ‘Buy’ on Hero MotoCorp, revising its 12-month price target to Rs5,304, up from earlier projections. The call reflects a potential 14% return from current levels of Rs4,659. The stock’s 52-week range stands between Rs6,246 and Rs3,344, underlining significant volatility and opportunity.

Valuation remains attractive at 16.7x FY27E P/E, as the brokerage assigns a sector-forward P/E multiple of 19x, considering Hero’s proven ability to protect margins, drive premiumization, and lead the EV category.

Quarterly Performance Snapshot: Revenue Pressure, Margin Resilience

Revenue for Q1 FY26 declined to Rs95,789mn, down 5.6% YoY, amid a temporary halt in production and soft seasonality in non-core segments.

EBITDA margin stabilized at 14.4%—flat YoY—supported by operational efficiencies, cost leverage, and a favorable product mix.

Profit before tax stood at Rs14,870mn, with PBT margin inching up to 15.5%, buoyed by higher other income and margin optimization.

Net Profit (PAT) came in at Rs11,257mn, essentially flat on YoY basis, underscoring operational resilience.

Key cost metrics such as raw material cost per unit (Rs46,745) and staff cost per unit (Rs4,579) reflect measured control.

Strategic Growth Levers: Electric Vehicle Acceleration

Hero achieved its highest-ever market share of 7% in Q1FY26 in India’s nascent EV segment, which surged to over 10% in July, powered by the launch of the VIDA VX2, featuring a battery-as-a-service model.

The VIDA product portfolio—targeting both sport (V2) and family (VX2) segments—will see further expansion, aided by growing touchpoints (600+ across 400+ cities) and recent PLI certification for VIDA V2 Pro.

Subscription-based pricing and innovative customer financing are broadening affordability and market reach.

Premium Segment and Harley-Davidson Partnership

Collaborative development with Harley-Davidson has yielded the X440 and Maverick 440, now retailed through an expanding 120+ Premia outlets.

Hero plans to launch a new Harley-Davidson-branded model in Q2FY26, with further rollouts scheduled through CY26, cementing its upmarket ambitions.

Premium strategy complements core volume segments, driving brand equity and margin expansion.

Disciplined Cost Optimization and Segment Leadership

Despite commodity inflation, the ongoing LEAP cost-saving program has provided a robust cushion, helping EBITDA margins stay within the 14.5–15% guidance range for FY26E–27E.

ICE margins improved to 16.8%, and overall profitability was bolstered by mix management and assertive pricing, even in the face of rising EV investments.

Leadership persists in mass market motorcycles, notably HF Deluxe’s dramatic 800bps YoY gain, reaching a roughly 67% share in the 100cc segment, and record 125cc scooter sales (Destini, Xoom) underlining continued dominance.

Financial Outlook and Key Metrics

Shareholding, Price Momentum, and Market Levels

Promoter shareholding held steady at 34.74% in Jun-25, with FPIs and Mutual Funds at 27.05% and 15.52% respectively, signalling persistent institutional confidence.

Current market price: Rs4,659

12M target: Rs5,304

52-week high: Rs6,246; 52-week low: Rs3,344

Potential upside: 14% from current levels

Investor Outlook and Strategic Catalysts

Hero MotoCorp stands out in a sector wrestling with uncertainty, thanks to its agile cost structure, decisive EV roll-out, and calculated premium market entry. LKP’s bullish stance draws from Hero’s blend of market leadership, consistent profitability, disciplined capital stewardship, an ambitious new product pipeline (including two new 125cc motorcycles and a scooter in the coming quarters), and powerful partnerships. The 14% upside potential is underpinned by resilient margins, expanding EV scale, and fortifying brand equity in premium bikes—a compelling proposition for long-term investors looking to capitalize on India’s next phase of two-wheeler growth.