Hero MotoCorp Ltd’s stock has risen 6% in the past two trading sessions to ₹5,890, after the June quarter (Q1FY27) earnings beat Street estimates despite a standalone gross margin contraction of 475 basis points (bps) year-on-year and 297bps sequentially to 28.5%.
The war in West Asia triggered inflationary spikes across oil and gas, freight, foreign exchange, and core raw materials, including steel, aluminium, and precious metals. To cope, Hero has implemented a cumulative blended price hike of about 4.5% across its internal combustion engine (ICE) portfolio since late February, and early double-digit increases for its electric vehicle (EV) variants.
Accelerated cost savings under its internal Leap programme and operating leverage offered some cushion, curtailing June-quarter Ebitda margin drop to 114bps on-year and 122bps sequentially to 13.3%. Core ICE portfolio Ebitda margin rose 90bps sequentially to 15.9%. Ebitda stands for earnings before interest, taxes, depreciation and amortization, while one basis point is one-hundredth of a percentage point.
Revenues surged 36% on-year to ₹13,000 crore, aided by 23% volume growth to 1.68 million units. Premiumization across the portfolio, driven by a shift in mix towards EVs, scooters, and premium variants, contributed a positive mix benefit of 8%. The overall core ICE portfolio grew 21% in Q1, backing the 151% EV growth. Core motorcycle (ICE) volume grew 17% to 1.48 million units.
Pole position
In the 100cc category, Hero’s market share stood at a formidable 85.8%. The Deluxe 125cc segment’s share rose steeply to 17.8% from 12.8% a year ago. Hero's VIDA EV brand expanded its market share to 10.9%, with revenue now contributing about 5% of the total mix.
Management noted that EV inventory is just 2-3 days, indicating strong pent-up demand, and plans to expand EV capacity to 45,000 units per month by the end of FY27, from 30,000 units per month currently.
The parts, accessories, and merchandise segment, a 13% revenue contributor, grew by 30%. The company is investing ₹750 crore to more than double handling capacity in the segment. Export volume jumped 63% on-year, with market share rising 110bps to 6.8%.
While Hero’s shares have gained just 2% so far in 2026, they are up 28% over the past year. While the company’s revenue and volume momentum may persist, near-term margin pressures are expected. PL Capital has assigned a target price of ₹6,000 for the stock, valuing the core business at 16x P/E, based on FY28 estimates, and its stake in Hero Fincorp at ₹55 and Ather Energy at ₹429.