Hero Moto share price top gainer among Nifty50 stocks on strong festive sales

The record festive sales logged by the company propped up the investor sentiments. In its press release Hero MotoCorp said that it recorded its highest-ever festive sales, clocking more than 14 lakh (1.4 million) units in retail sales during the 32-day festive period – between the first day of the Navratras and Bhai Dooj – this year.

Riding on robust demand across rural markets as well as steady retail off-take in key urban centers, the Company registered a 19% growth over the previous year, and surpassed its previous highest retail of 12.7 lakh units which was recorded in the festive period of 2019.

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The strong festive sales by Hero MotoCorp is seen as good news considering concerns that have persisted on pick up in sales of entry level two wheelers for industry as a whole. The Hero MotoCorp release also indicates that the rural demand, which was lagging the urban demand over the last few quarters, is showing improvement. This if sustains can help drive performance of Hero over the coming quarters.

The wholesale dispatches for the month of October already had remained strong ahead of festive season Hero MotoCorp had recorded 26% y-o-y rise in domestic volumes during October. Its Scooter volumes grew 30% y-y; motorcycles grew 26% y-o-y . While the eyes were on liquidation of inventory the strong sales performance by Hero Motocrop during festive season may mean that the volume growth may continue during coming months say analysts.

Himanshu Singh – Research Analyst, Prabhudas Lilladher Pvt Ltd said that the liquidation of inventory by Hero is positive and the company can sustain sales by filling up channel inventory now. As per Singh’s estimates the current inventory must be at around 4 week of sales compared to around six week inventory that is normally maintained in the channel.

The growth has remained good for the industry and across regions which is another key positive. Singh said that while growth had remained at 20% level last year during the festive season, a 19% growth this year is another positive.

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Hero MotoCorp has indicated towards pick up in rural demand which is very encouraging as per Singh. However it is the sustenance of this demand that will hold key. Rural demand hand supported the sales growth during months April May this year and even last year in the festive season but it had not sustained thereafter. 

On Valuations the Hero MotoCorp is trading at its average one year forward earning estimates . This as Singh means that while there may not be significant upside however since the stock is not trading at significant premium means there is a cushion for the stock on the downside too

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions

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Updated: 16 Nov 2023, 05:25 PM IST