Shares of Hero MotoCorp hit a 10-month high of Rs 2,849, up 3 per cent on the BSE on Monday as analysts expect the company to be the least impacted by the Covid-19-led disruptions given their relatively strong recovery in the rural consumption basket. The stock of the world’s largest two-wheeler manufacturer was trading at its highest level since September 24, 2019. It rallied 93 per cent from its 52-week low of Rs 1,475 touched on March 24, 2020.
Thus far July, the stock gained 12 per cent, after, in a highly disrupted month of June 2020, the company had sold 450,744 units – a record sequential growth of four times over the 112,682 units dispatched in May.
A major part of the market demand is emanating from the rural and semi-urban markets, which have been helped to a large extent by the various stimulus packages rolled out by the government. A combination of multiple factors, including the forecast of a normal monsoon, a bumper Rabi crop, and the upcoming festive season are expected to keep the momentum going over the next few months, Hero MotoCorp said.
The sales in the first quarter (April-June) of the financial year 2020-21 (Q1FY’21) was subdued due to the impact of Covid-19 and the effects of the closure of the plant operations and the retail outlets through the entire month of April and most of May. Despite the challenging conditions, Hero MotoCorp sold a total of 563,426 units of motorcycles and scooters in Q1FY21.
In Q1FY21, Hero MotoCorp’s margin remains resilient in a tough environment, and we expect it to improve from the current levels in FY22, led by the LEAP 2.0 initiative and expected volume recovery (FY22 volume to be largely similar to FY20), Elara Capital said in Q1FY21 result preview.
The brokerage firm believes Hero MotoCorp will continue to be a key beneficiary of the rural comeback and expected downtrading in motorcycles. With dealer inventory at three weeks, we expect wholesale to remain robust in Q2FY21 with the upcoming festival season. Given buoyancy in the rural markets and the company’s strength, we expect it to increase 2W share in FY21 for the first time since FY12, it said.