Hero MotoCorp Share Price Target at Rs 4,761: Motilal Oswal Research
Motilal Oswal Financial Services has reiterated its “BUY” recommendation on Hero MotoCorp, setting a revised target price of Rs 4,761, which implies a potential upside of +17% from the current market price of Rs 4,067. The stock’s in-line Q4FY25 performance, combined with a resilient rural demand outlook and well-strategized electric vehicle (EV) expansion, underpins the brokerage's positive stance. Margins held steady year-on-year, and the company's foray into new geographies, coupled with strategic investments in emerging mobility platforms, enhances its long-term growth narrative. A strong dividend payout and healthy free cash flow also reinforce investor confidence in India’s largest two-wheeler manufacturer.
Hero’s Margin Stability and Operational Performance
Motilal Oswal reports that Hero MotoCorp’s EBITDA margin stood at 14.2% in Q4FY25, aligning with analyst estimates. However, when adjusted for a Rs 1.43 billion loss in its electric vehicle unit, the ICE (internal combustion engine) segment posted a healthier margin of 16.1%.
For the fiscal year 2025, the company’s total revenue rose 9% YoY to Rs 408 billion, driven by a 5% volume increase and a 2% rise in blended average selling price (ASP). Notably, the EBITDA margin expanded by 40 basis points to 14.4%, signaling improved cost efficiency despite headwinds from EV investments.
Positive Volume Growth and Rural Tailwinds
Motilal Oswal forecasts a volume CAGR of approximately 5% from FY25 to FY27. The growth is expected to stem from new product introductions, expanded export penetration, and a gradual recovery in rural demand. Hero's extensive presence in non-urban India and brand strength in economy and executive segments position it favorably as the rural economy rebounds.
Electrification Strategy and Upcoming Launches
Management has confirmed the launch of two new affordable electric vehicles in July 2025, intended to fill product gaps and accelerate EV adoption. The company targets break-even in its EV vertical once it achieves a monthly sales run rate of 25,000–30,000 units. While this goal remains a couple of years away, the effort is seen as strategically sound, especially as EV acceptance broadens in India.
Euler Motors Stake Enhances Future Diversification
Hero has also diversified by acquiring a 34.1% stake in Euler Motors for Rs 5.1 billion. Euler operates in the three-wheeler (3W) electric commercial segment, an industry valued at Rs 170 billion annually with EBITDA margins exceeding 20%. Management sees strong synergy and growth potential in this space, marking a thoughtful foray into next-gen mobility.
Export Growth Outpaces Industry
Hero’s exports in FY25 grew 43% YoY, double the industry rate, led by markets such as Bangladesh, Colombia, Nepal, and Mexico. Approximately 40% of exports were in the premium category. With increasing focus on exports and aggressive geographical expansion, Hero aims to sustain this momentum in the coming years.
Q4 Performance Snapshot
Here is a summary of key Q4FY25 financial and operational metrics:
| Metric | Q4FY25 | YoY Growth |
|---|---|---|
| Total Revenue | Rs 99.4 billion | +4% |
| Net Profit (PAT) | Rs 10.5 billion | In line with estimate |
| Blended ASP | Rs 71,991 | +5% YoY |
| Spare Parts Revenue | Rs 15.5 billion | +11% |
| EBITDA Margin | 14.2% | Stable |
Dividend and Financial Position
For FY25, Hero declared a final dividend of Rs 165 per share, equating to a payout ratio of 72%. The company also recorded a free cash flow (FCF) of Rs 33.7 billion after a capex of Rs 8.1 billion. Retail finance penetration remained stable at 63%, with expectations of improvement due to a softer interest rate environment.
Valuation Metrics and Forecasts
Motilal Oswal sees an upside potential in Hero's valuation, trading at a P/E of 16.6x FY26E and 15.3x FY27E. The brokerage anticipates a revenue/EBITDA/PAT CAGR of ~8%/7%/7% between FY25 and FY27.
| FY | Sales (Rs B) | EBITDA (Rs B) | EPS (Rs) | P/E (x) | RoE (%) |
|---|---|---|---|---|---|
| FY25 | 408 | 58.7 | 230.3 | 17.7 | 24.4 |
| FY26E | 444.3 | 62.0 | 245.1 | 16.6 | 23.9 |
| FY27E | 477.1 | 66.8 | 265.3 | 15.3 | 24.2 |
Investment Recommendation and Target
Motilal Oswal has reaffirmed its BUY rating with a target price of Rs 4,761, based on a 17x FY27E EPS valuation, with additional valuation for Hero’s holdings in Hero FinCorp (Rs 110/share) and Ather Energy (Rs 140/share), adjusted for a 20% holding company discount.
Bottomline
Hero MotoCorp’s structural strengths—robust rural distribution, EV readiness, and high-dividend yield—offer a compelling investment narrative. While EV profitability remains a long-term objective, the company's traditional ICE dominance, resilient financials, and export agility place it on firm footing. For investors looking at consistent dividend plays with future-ready strategy, Hero MotoCorp remains a strong contender.
