Hero MotoCorp to hike prices from December 1; stock gains nearly 4%

Shares of Hero MotoCorp gained nearly 4 per cent to Rs 2,803.15 on the BSE in Monday's intra-day trade after the two-wheeler major said it will increase the prices of its motorcycles and scooters by up to Rs 1,500, with effect from December 1, due to inflationary cost pressures.

In the past three trading days, stock of the two-three wheelers company has rallied 5.5 per cent. In comparison, the S&P BSE Sensex was down 0.04 per cent at 62,271 at 09:26 AM.

The management said moving forward, economic indicators point towards a growth in demand, and the management expects industry volumes to pick up in the coming quarters.

"Hero MotoCorp will make an upward revision in the ex-showroom prices of its motorcycles and scooters, effective from December 1, 2022. The price increase will be up to Rs 1,500 and the exact quantum of increase will vary by specific models and markets," the company said in regulatory filing.

The upward revision of the prices of our motorcycles and scooters has been necessitated due to overall inflationary costs, said Niranjan Gupta, Chief Financial Officer (CFO), Hero MotoCorp.

"We will continue to provide innovative financing solutions in order to cushion the impact on the customers. We have also put in place accelerated savings programs, which will help us to offset any further cost impact, and drive improvement in margins," said Niranjan Gupta.

According to ICICI Securities, this comes as positive surprise as, during Q2FY23, the company reported ~80 bps gross margin expansion which involved ~30-40 bps savings related to cooling of commodity prices. "This fresh price hike will further boost margin profile at the company (over and above the savings already guided for in H2FY23) and consequently improve already robust return ratios profile," the brokerage firm said in a note.

Analysts at Prabhudas Lilladher believe Hero will be a key beneficiary of rural recovery and positive demand from the upcoming marriage season. "It will benefit from its increasing focus on exports and premiumization. Also, softening of input costs along with its Leap savings program can lead to margin expansion," the brokerage firm said.