Hero MotoCorp Shares Climb as Analysts Applaud Cost-Cutting Push

Shares of Hero MotoCorp climbed about 3% on Friday, as investor sentiment turned positive on the company's ability to manage rising input costs. The stock traded at 5,720 rupees, making it the second-biggest gainer on the Nifty Auto index, which itself was up roughly 1%.

The rally followed the company's first-quarter results, which showed profit jumping nearly a third and core earnings rising by a fourth. The growth was driven by strong volume expansion and higher average selling prices, even as core margins contracted by 300 basis points due to elevated commodity costs.

Analysts believe the results indicate Hero is better equipped to handle raw material inflation than earlier feared. Attention is now shifting to the company's focus on rural demand, its push for market share in premium motorcycles and scooters, and its electric vehicle strategy.

Brokerages highlighted several positives. Citi attributed the earnings beat to cost-reduction efforts that offset higher-than-expected commodity costs, leading to lower selling, general, and administrative expenses. Morgan Stanley noted that revenue growth was supported by volume expansion, with both revenue and EBITDA exceeding consensus estimates.

Goldman Sachs pointed out that while gross margins remained under pressure from input costs, the company's flagship VIDA V2 Pro received approval for production-linked incentives on July 8. This could signal a further ramp-up in EV volumes, though electric vehicles currently make up only 3% of Hero's total volume.

Looking ahead, analysts said investors will closely watch the company's festive-season market-share strategy and its ability to mitigate further cost inflation. Rising commodity costs, exacerbated by the Mideast war, have squeezed automakers' margins this quarter, prompting price hikes across the industry.

On average, 33 analysts rate Hero MotoCorp shares as "buy," with a median price target of 5,861 rupees, according to LSEG-compiled data.