The lack of demand for two-wheelers in the United States continues to be a problem for Hero MotoCorp Ltd. The issue is more pressing for Hero MotoCorp than it is for rivals like TVS Motor Co. Ltd. and Bajaj Auto Ltd. because the entry-level market accounts for a significant portion of the company’s sales. The new threat that 2023 will likely be an El Nio year has made rural demand even more difficult to meet.
Against this background, the send off of Honda’s 100 cc bicycle, the Sparkle 100 doesn’t look good as the item has been valued forcefully and may cost Legend piece of the pie. Ex-showroom, the Shine 100 has been listed at 64,900. According to Kotak Institutional Equities’ analysts, the Hero HF Deluxe’s starting price is 3 percent higher than the Honda Shine’s with comparable features.
In addition, the Hero HF Deluxe will increase in price starting in April, while the Honda Shine 100 is OBD-2 compliant. Remember that Hero had announced a price increase of up to 2% starting on April 1 for certain models and markets due to the change in OBD-2 standards. As a result, the Honda Shine 100’s price gap will get even wider.
“We expect Hero and Bajaj Auto to lose market share given the aggressive pricing of the Shine 100,” the Kotak report stated. In FY 2024E, we anticipate Hero’s domestic 125-cc motorcycle segment to grow in volume at a rate of 5% year-over-year. From 53% in FY16, the domestic motorcycle segment’s share decreased to 45.8% in the nine months ending in December.
Additionally, Hero has yet to accelerate its new product launches in the premium and electric vehicle (EV) categories. Vida, the automaker’s electric vehicle, accounted for less than 1 percent of all two-wheeler EV volumes in March, according to Vehicle data.
Yes, Hero’s earnings per share estimates for FY2023-25E have been cut by 3-7% by Kotak analysts due to lower volume and EBITDA margin estimates. Hero stock doesn’t have many catalysts. So far in 2023, Hero shares have dropped more than 17%. The Nifty Auto index, on the other hand, has lost 6%.