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Hero MotoCorp Ltd

| Q2 FY26 Post Results Conference Call

BULLISH SENTIMENT

Report Source

⬤14th Nov 25

Summary : Hero MotoCorp reported record Q2 FY26 financials, significant market share gains across segments, and an optimistic outlook driven by new products, rural recovery, and EV growth, despite minor commodity inflation concerns.

Management Perspective positive : Management repeatedly highlighted "strong financial performance," "highest ever" revenue, EBITDA, and PAT, and expressed confidence in "sustaining retail momentum" and "outperforming the market."

Concall Report Analysis & Insights

Business Overview

  1. Q2 FY26 revenue reached ₹12,126 crores, a 16% year-on-year growth.
  2. Achieved highest ever quarterly EBITDA of ₹1,823 crores, up 20% year-on-year.
  3. Reported highest ever PAT of ₹1,393 crores, reflecting 16% growth.
  4. Market share expanded by 3.7% year-on-year to 31.6% in October.
  5. EV business delivered its highest ever quarterly market share of 11.7%.

Future Growth Prospects

  1. Expects 2-wheeler industry to grow 8-10% in the second half of FY26.
  2. Company is poised to outperform the overall market and gain share.
  3. Continued investment in Premium, Scooters, and EV portfolio.
  4. New product launches like Glamour X and Xtreme 125R will drive H2 growth.
  5. Global business aims for continued upward growth trajectory.

Management Insights

  1. GST reductions ahead of festive season significantly uplifted consumer sentiment.
  2. Concluded festive season with nearly 1 million retails on VAHAN by October 25.
  3. Mr. Harshavardhan Chitale appointed as new CEO, effective January 2026.
  4. Achieved lowest inventory and receivables in recent years post-festive period.
  5. Company expanded its global presence to 52 countries, including Europe and UK.

Signs of Skepticism

  1. Management's H2 FY26 industry growth guidance of 8-10% seems conservative.
  2. This guidance implies a potential decline in retail for the December-March period.
  3. Analyst questioned if the 8-10% growth expectation was too low given current trends.

Risk Factors

  1. Commodity inflation of 1-2% is expected in Q3 FY26.
  2. Potential for demand to not sustain festive levels post-season.
  3. Uncertainty regarding the timing and cost impact of ABS implementation.

Good To Know

  1. Dow Jones Sustainability Index score improved to 75 in FY'25 from 69 in FY'24.
  2. Company is investing in brand building and improving customer service with Hero 2.0 and Premia.
  3. New CEO brings three decades of global and diversified expertise.
  4. Hero MotoCorp is now among the top 2 EV players in 56 towns.

Key Drivers

  1. GST reductions uplifted consumer sentiment.
  2. New product launches drive market share.
  3. Rural market recovery expected to sustain.
  4. EV segment shows robust growth.

Key Analyst Discussions

Competitive Environment

  1. Gained market share across all key segments, outperforming industry growth.
  2. EV business holds over 20% share in 48 towns, ranking top 2 in 56 towns.
  3. Global business grew 3x the market, focusing on top 10 markets for share gains.
  4. Company is the highest spender in terms of share of voice post-festive period.

Market Trends & Consumer Behavior

  1. GST reductions significantly boosted consumer sentiment and retail momentum.
  2. First-time buyers increased to 81% during festive season from 70-72% average.
  3. Rural market recovery observed late in festive season, expected to continue.
  4. Post-festive demand remains strong, supported by lowest inventory levels.

Financial Highlights

  1. EBITDA margin for ICE business improved to 17.7% due to cost efficiencies and mix.
  2. Overall EBITDA margin for Q2 was 15%, within the 14-16% guidance range.
  3. Gross margins are improving through BOM cost reduction, PLI benefits, and price increases.
  4. Commodity costs were largely flat in Q2, with 1-2% inflation expected in Q3.

Product Composition

  1. Scooter contribution (ICE + EV) is robust, with new products serving diverse customer needs.
  2. EVs are gaining significant traction, especially in the scooter segment.
  3. Entry-level segment is expanding, expected to grow further with GST impact.
  4. No direct correlation seen between EV purchase and entry segment buying.

Strategic Considerations

  1. Continued investment in brand building, new products, EV, and global business.
  2. Focus on scaling EV volumes and expanding into key markets for profitability.
  3. Battery-as-a-Service offering democratizes EV access, driving inquiries.
  4. Company is in talks with the government regarding ABS implementation.