Hero MotoCorp shares slip to over 5-year low, tumble 12% in February

Shares of Hero MotoCorp (HMCL) slipped 2 per cent intra-day to hit an over five-year low of Rs 2,192 on the BSE on Monday amid concerns that the volume weakness might continue in the next 2-3 quarters due to inventory correction with dealers and notable price increases as a result of the BSVI transition. The two-wheeler major's stock was trading at its lowest level since May 2014.

Thus far in the month of February, HMCL has underperformed the market by falling 12 per cent, after the company said, on February 14, that its production is likely to be impacted by around 10 per cent in February due to the ongoing issue of Coronavirus (Covid-19) in China that has affected the supply of some components to its manufacturing facilities in India. In comparison, the S&P BSE Sensex was up marginally by 0.2 per cent so far in the current month.

On Thursday, February 20, the company informed the stock exchanges that the loss, if any, is not quantifiable and will depend on the developing situation in China. "We are monitoring the situation and will provide an update as and when required," the firm said.

However, analysts at Antique Stock Broking upgraded HMCL to 'Buy' from 'Hold' with a revised target price of Rs 2,683 (16x FY22e earnings) as the brokerage firm thinks that risk of product disruption related volume loss in BSVI has been addressed through smart re-engineering approach in core brands and aggression in losing brands/ segments.

"We believe, if product performance and on-the-ground sales execution is done well for few models like Passion Pro and Glamour we can see significant re-rating of the HMCL stock, the brokerage firm said.

“We came back from the meet with some glimmer of hope, particularly given the tangible improvement in the showcased new product launches. Building on this R&D initiative holds the key to realize its aspirations in scooters, premium motorcycles, exports and future mobility. Hence, this is the biggest monitorable and re-rating catalyst for the stock. While the near-term outlook is challenging due to the weak demand environment and the upcoming BS6 transition, we believe this is largely in the price,” analysts at Motilal Oswal Securities said in company update. The brokerage firm has ‘neutral’ rating on the stock with target price of Rs 2,504 per share.

At 12:33 pm, HMCL was trading 1.6 per cent lower at Rs 2,205 on the BSE, against 0.87 per cent decline in the S&P BSE Sensex. A combined 412,789 shares have changed hands on the counter on the NSE and BSE so far.