Hero MotoCorp was the biggest gainer among Nifty stocks on Thursday, Hero MotoCorp share prices ended the day with gains of 3.34% on the NSE.
Investor sentiment was boosted by the company’s record sales. In its press release Hero MotoCorp said it has recorded its highest ever festive sales, doing over 14 lakh (1.4 million) units in retail sales during this 32-day festival period – between the first day of Navratras and Bhai Dooj. year.
Relying on strong demand across the rural markets as well as steady decline in retail in major urban centres, the Company registered a growth of 19% over the previous year, surpassing the previous highest retail volume of 12.7 lakh units recorded during the festival. 2019.
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Hero MotoCorp’s strong festive sales is seen as good news considering the lingering concerns in entry-level two-wheeler sales for the industry as a whole. Hero MotoCorp’s release also indicates an improvement in rural demand, which has been falling behind urban demand for the past few quarters. If this holds, it can help propel Hero’s performance in the coming quarters.
Wholesale shipments for October remained strong already ahead of the Christmas season, Hero MotoCorp recorded a 26% rise in domestic shipments during October. Scooter numbers grew 30% yy; motorcycles grew 26% yoy. While inventory liquidation was expected, Hero Motocrop’s strong sales performance during the festive season may mean volume growth may continue in the coming months, say analysts.
Himanshu Singh – Research Analyst, Prabhudas Lilladher Pvt Ltd said inventory liquidation at Hero is positive and the company can sustain sales by filling channel inventory now. According to Singh’s estimates the current inventory must be about 4 weeks of sales compared to six weeks of inventory normally held in the channel.
Growth remained good for the industry and across the regions, which is another positive. Singh said that while the growth remained at a level of 20% last year during the festive season, this year’s growth of 19% is another positive.
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Hero MotoCorp has indicated that rural demand is expected, which according to Singh is very encouraging. However sustaining this demand will be key. The rural demand arm supported the sales growth during April-May this year and even last year in the Christmas season but it did not last after that.
On Valuations the Hero MotoCorp is trading at its average one-year forward earnings estimates. This means for Singh that while there may not be significant upside, however, since the stock is not trading at a significant premium, that means the stock is also cushioned on the downside.
Disclaimer: The opinions and recommendations made above are the opinions of individual analysts or brokerage firms, and are not the opinions of Mint. We encourage investors to check with certified experts before making any investment decision
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Updated: 16 November 2023, 05:25 PM IST
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