Hero MotoCorp

shares jumped 4.9per cent to their day's high of ₹4,268 on the BSE after domestic brokerage firm

JM Financial

re-initiated coverage on the stock with a 'Buy' rating and a target price of ₹4,700, indicating a potential upside of 15per cent over the closing price on Wednesday.

The revised outlook comes as the brokerage firm projects strong growth for the two-wheeler major, supported by new product launches, EV segment expansion, and a recovery in rural demand.

During Q4 FY25, Hero MotoCorp reported net sales of ₹99.4 billion, registering a 4per cent year-on-year increase, though sales declined by 3per cent quarter-on-quarter. Volumes for the quarter stood flat year-on-year but dropped by 6per cent QoQ to approximately 1.38 million units. The decline was attributed to a temporary production halt between April 17 and 19 for maintenance and supply chain realignment, with production expected to normalize by May 2025.

The margin improvement in the ICE segment was notable, with a 50-bps increase to 16.1per cent YoY, led by a favourable product mix and lower raw material costs. However, margins in the EV business remained under pressure, with price hikes implemented to offset costs arising from the OBD-2B norms.

Profit after tax (PAT) for the quarter stood at ₹10.8 billion, representing a 6per cent YoY increase but a 10per cent decline QoQ. The brokerage firm noted that the decline on a sequential basis was attributed to higher expenses related to new product launches and EV ramp-up.

Hero MotoCorp highlighted strong demand prospects driven by rural recovery and the marriage season in May and June, which is expected to boost domestic two-wheeler demand by 6-7per cent in FY26. The company also gained 250 basis points of market share in the 125cc+ segment during FY25, supported by the success of new launches like the Xtreme 125R, Xtreme 250R, and Xpulse 210.

In the scooter segment, Hero improved its market share by 140 bps on a QoQ basis in Q4, driven by good response to the new Destini 125 and recently launched Xoom 125 / Xoom 160.

On the EV front, Hero MotoCorp exited March 2025 with a 7per cent market share in the electric two-wheeler (E2W) segment, up from 3per cent in March 2024. This growth was primarily driven by the launch of VIDA V2, supported by price intervention and targeted brand-building efforts.

The company has filed for Production Linked Incentive (PLI) benefits for VIDA Pro and expects approval by July 2025. Additionally, Hero also plans to introduce two new affordable EVs in 1HFY26, aiming to ramp up monthly production to 25,000-30,000 units.

Investment in the EV segment stood at ₹1.43 billion in Q4 FY25. The company also expanded its electric three-wheeler (E3W) segment through the acquisition of a 34.1per cent stake in Euler Motors for ₹5.1 billion.

Hero MotoCorp continues to maintain its leadership position in retail sales and is optimistic about the upcoming festive season. Channel inventory was reported at a normalised level of 4-5 weeks as of Q4 FY25, with management expecting a step-up in the festive season. The company also reported a financing penetration rate of 50per cent in Q4 and 63per cent for the full fiscal year FY25, with management aiming for further expansion in the financing penetration rate.

Outlook on profitability, however, remains cautious as the company maintains a long-term margin guidance of 14-16per cent, with a continued focus on cost-saving measures and operational leverage.