Hero Motocorp

Basis of our Recommendation

Hero MotoCorp's management has expressed a constructive outlook for FY27, anticipating double-digit industry growth driven by strong demand and aggressive capacity expansions in both internal combustion engine (ICE) and electric vehicle (EV) segments. The company's strategic focus on recovering market share through improved product availability and a richer mix, including premium motorcycles and exports, is expected to bolster revenue growth. Despite facing near-term margin pressures from commodity inflation, management is implementing cost-control measures to maintain profitability, targeting a 14-16% EBITDA margin in the medium term. Vista's financial outlook aligns with these developments, projecting stable revenue growth and margins, supported by a conservatively financed balance sheet. The ongoing transition towards EVs and the expansion of the premium product portfolio are key growth drivers, while risks include potential market share erosion and input cost volatility. The favorable macro environment, characterized by improving manufacturing indicators and stable inflation, further supports the company's growth trajectory. Over the next 12-24 months, opportunities lie in scaling the VIDA EV business and expanding exports, while headwinds include commodity cost pressures and execution challenges in rapidly scaling production