Hero MotoCorp's Stock Slips 4% After Management Warns of Margin Pressure

Hero MotoCorp Shares Fall Amid Commodity Cost Concerns

Shares of Hero MotoCorp, India's largest two-wheeler maker, erased early gains to fall into the red on Wednesday after the management flagged a near-term hit to margins from rising commodity costs, despite reporting record revenue and profit in Q4 FY26.

The company's shares were trading at Rs 5,046 in late morning trade, down 1.23 percent for the day. The stock had initially surged as much as 3.3 percent in the morning trade after the company posted a strong set of Q4 FY26 earnings. However, it reversed sharply lower after the earnings call. From the day's high, the stock fell around 4.4 percent.

Hero MotoCorp reported a 30 percent year-on-year rise in standalone net profit to a record Rs 1,401 crore for the January-March quarter, driven by strong volume growth. Revenue from operations also hit a record high, rising 29 percent year-on-year to Rs 12,797 crore. The company's EBITDA increased 31 percent year-on-year to Rs 1,856 crore in Q4 FY26.

Read also: Expert Portfolio Manager Raja Venkatraman Names Top Investment Picks for June 4

The company also announced a final dividend of Rs 75 per equity share. Including the interim dividend of Rs 110 per share already declared, the total dividend payout for FY26 stood at Rs 185 per equity share.

Brokerage firm Jefferies retained its "underperform" rating on Hero MotoCorp stock with a target price of Rs 5,000 per share after the Q4 results. The brokerage noted that Hero MotoCorp's EBITDA and profit grew around 30 percent year-on-year, supported by a 24 percent rise in volumes and a 3 percent quarter-on-quarter increase in average selling prices. However, it highlighted that margins declined slightly on a sequential basis.

Investor focus later shifted to management commentary on commodity inflation and profitability pressures. During the post-results conference call, Hero MotoCorp said commodity costs had risen sharply because of the ongoing West Asia conflict and that input cost inflation remained in the high single digits. The company said it saw around Rs 2,000 per unit increase in commodity costs during Q4.

Read also: MarketSmith India's 4 June Stock Recommendations

Management acknowledged that the recent 2 percent price hike implemented in April was not sufficient to fully offset the rise in input costs. The company also warned of a "transitionary" impact on margins in the short term, though it reiterated its commitment to maintaining its long-term EBITDA margin band of 14-16 percent.

Hero MotoCorp said it was taking necessary actions to protect profitability and remained confident that the current margin pressure was temporary. The company added that it had navigated supply-chain challenges without disruptions despite the West Asia war.

Management guided for high single-digit industry growth in FY27 and said scooter growth is expected to outpace motorcycles. It also indicated that demand growth in the first half of FY27 could remain stronger than the second half because of a higher base effect later in the year.