Hero MotoCorp Upgrade to Buy with a Price Target of Rs 6039: LKP Research
Hero Motocorp Reports Strong Q4 FY26 Performance
Hero Motocorp, a leading manufacturer of motorcycles and scooters, has reported a robust performance in the fourth quarter of financial year 2026 (Q4 FY26). The company's revenue rose by 28.8% year-over-year (YoY) to ₹128 billion, driven by strong demand across various segments including 100-125cc motorcycles, scooters, premiums, and electric vehicles (EVs). This growth was fueled by higher first-time buyer participation and improving rural sentiment.
The company's input costs increased to 68.5% of sales from 65.5% YoY and 67.4% quarter-over-quarter (QoQ) due to higher prices of aluminum and copper. However, despite this increase, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) grew by 31% YoY to ₹18.1 billion, with margins expanding to 14.5% (up 30 basis points YoY and down 20 basis points QoQ). This growth was aided by cost savings from the LEAP program, price hikes, and operating leverage.
Profit After Tax (PAT) rose by 29.6% YoY to ₹14 billion, while declining by 4.5% QoQ, despite lower other income YoY. The quarter also benefited from strong traction in the EV segment driven by the VIDA VX2, sustained market share gains across entry and deluxe bike and scooter segments, and a sharp pickup in exports.
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Financial Performance Comparison
| Q4 FY26 | Q4 FY25 | |
|---|---|---|
| Revenue | ₹128 billion | ₹99.7 billion |
| EBITDA | ₹18.1 billion | ₹13.8 billion |
| PAT | ₹14 billion | ₹10.8 billion |
| EBITDA Margin | 14.5% | 13.8% |
| PAT Margin | 10.9% | 10.8% |
The company's overall performance reflects healthy demand, GST-led affordability improvements, product refreshes, and disciplined cost management. Looking ahead, we estimate revenue, EBITDA, and PAT to grow at a compound annual growth rate (CAGR) of 12%, 15%, and 15%, respectively, over FY26-FY28E. We value the stock at 17x Price-to-Earnings (P/E) ratio and assign a BUY rating with a target price of ₹6,039 for FY28E earnings.
We have cut down our price target in line with concerns over the base effect in the second half of the year, a lower monsoon forecast, and increasing commodity costs.
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Investor Takeaway
Investors should consider upgrading their position in Hero Motocorp with a price target of Rs 6039.
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