# Hero MotoCorp Ltd (NSE: HEROMOTOCO) — Bear Case

**Rating: UNDERWEIGHT | 12M Target ₹4,200 | CMP ₹5,222 (11 Sep 2026 close) | Implied −20% | Conviction: Medium | Sector: Automobiles — 2/3 Wheelers**

## Investment Thesis

Hero MotoCorp is India's largest two-wheeler maker defending a melting moat. ~85%+ of volumes still come from 100–125cc commuter bikes (Splendor, HF Deluxe, Passion, Glamour) — the exact segment being squeezed by (a) premiumisation (125cc+ and Royal Enfield/TVS/Bajaj), (b) scooter share loss to Honda/TVS, and (c) electric disruption where Vida is a distant #4 behind TVS, Bajaj Chetak and Ola. Five-year sales CAGR of 8.9% flatters a depressed COVID base; volumes in FY25 (~5.9m units) remain below the FY19 peak (~7.8m). At 18.4x TTM earnings with single-digit volume growth, a 71% payout masking a no-growth core, and rising EV/capex intensity, we see ~20% downside on a de-rating to 14x FY28E EPS.

## Key Data (11 Sep 2026)

- Market cap ₹1,04,504 Cr (~US$12.5bn) | 52-wk ₹4,672–₹6,390 (−18% from high)
- Stock P/E 18.4–18.9x | Book value ~₹1,078–1,080 | P/B ~4.8x
- Dividend yield 3.54% | Payout ~71% | ROCE 33–35% | ROE 25–28%
- Almost debt-free | Debtor days improved 26.5 → 20.2/18.0 days
- BSE: 500182 | NSE: HEROMOTOCO | F&O | Face value ₹2 | ~20.0 Cr shares

## Financials (consolidated, ₹ Cr)

| | FY22A | FY23A | FY24A | FY25A | FY26E (UW) |
| Revenue | 29,551 | 33,805 | 37,789 | 40,756 | 42,800 |
| Growth | — | +14.4% | +11.8% | +7.8% | +5.0% |
| EBITDA margin | ~12.5% | ~12.8% | ~13.8% | ~14.3% | ~13.5% |
| PAT | 2,476 | 2,910 | 3,742 | 4,610 | 4,750 |
| EPS (₹) | ~124 | ~146 | ~187 | ~231 | ~237 |
| DPS (₹) | ~95 | ~115 | ~140 | ~185* | ~170 |
| ROE | ~17% | ~19% | ~23% | ~26% | ~24% |

*FY25 DPS includes special/top-up; TTM yield 3.54% at ₹5,222 implies ~₹185/share. E = Equinox illustrative estimates from public filings/Screener.in.

## Consensus vs Equinox (illustrative)

| Metric | FY27E Cons. | FY27E UW | FY28E Cons. | FY28E UW |
| Revenue (₹ Cr) | 45,500 | 44,100 (+3% ) | 48,500 | 45,800 (+3.8%) |
| EBITDA margin | 14.8% | 13.6% | 15.0% | 13.8% |
| EPS (₹) | 315 | 285 | 345 | 300 |
| P/E @ ₹5,222 | 16.6x | 18.3x | 15.1x | 17.4x |

Street embeds margin expansion to 15% and double-digit EPS growth. We model flat volumes, commodity drag, and Vida losses capping margins at ~13.5–14%.

## Valuation: ₹4,200 target

14x our FY28E EPS of ₹300 = ₹4,200 (−19.6%). Bull ₹6,000 (17.5x FY28E cons. EPS 345 on rural + GST-cut volume surprise). Deep value ₹3,400 (11x FY28E UW EPS on EV share loss). Current 18.4x TTM / ~17.4x FY28E UW leaves no safety for a no-growth compounder.

## Catalysts

- Monthly dispatches (Aug-26: 5,68,398 units; watch festive Sep–Nov) — downside if retails lag
- Q2 FY27 results (Oct/Nov 2026) — Vida losses, premium mix, margin disclosure
- Jefferies 5th India Forum, Gurugram — 16 Sep 2026 (company attending)
- GST/insurance-cost decisions on 2W; E20/fuel-economy regulation; commodity (steel/aluminium) prices

## Risks to our call

Rural recovery + below-normal-to-normal monsoon, GST cut on 2W, strong festive season, Vida VX2 Go traction, Harley X440/Mavrick 440 premium scale-up, and high dividend yield support could squeeze the short.

*AI-generated illustrative research — not investment advice. Data as of 11–14 Sep 2026 from Screener.in/company filings. Consult a SEBI-registered adviser.*