Hero MotoCorp set to take on Bajaj and Royal Enfield with fresh launches

• The two wheeler maker has surprised the market with three back to back launches.
• Harley Davidson X440 and Karizma XMR in the premium segment are expected to help the company take on competition.
• In August, it reported a 5.5% YoY rise in total sales to 488,717 units.

In the last three months, Hero MotoCorp has positively surprised the market with three back to back launches of Passion Plus, Harley Davidson X440 and Karizma XMR. It also has three more launches in the pipeline across segments — all which brokerages hope will pull up its market share in the two-wheeler segment.

The company also launched an entry level scooter Hero Xoom scooter earlier this year. “These launches are driving higher customer footfalls and are expected to have a positive rub-off on the existing and refreshed models,” said J M Financial.

Just one or two product successes are sufficient to drive positive brand perception about HMCL – and that will enhance its overall appeal across its product portfolio, the brokerage adds. The commentary from the dealers is also encouraging as most of them across 13 states are seeing good sales in higher double digits.

The festive season too is around the corner and the new launches should only take things forward. It has already reported a 5.5% rise in total sales in August rose 5.6% to 488,717 units, as compared to a year back.

Riding back into the game

Hero Moto’s Passion Plus, launched in June, is a refreshed version of one of India’s best selling bikes – and two of the latest launches are the premium segment. While the Harley Davidson X440, which came out in July, will take on the likes of Triumph and Royal Enfield, the latest Karizma XMR will take on Bajaj’s Pulsar.

“Passion+ has been received well by customers and there is excitement around new premium launches. Customer enquiries for HD X440 remain high and bookings are further expected to increase with wider availability of the model in the network,” said J M Financial.

More than Splendour

Hero MotoCorp (HMCL) banked heavily on its biggest hit, the Splendor, which was India’s highest selling bike, for a long time. It was all well for the 39-year-old company until India started shifting towards the slightly more premium bikes being offered by Bajaj, Royal Enfield and to an extent TVS. The inability to play in that segment (200 cc to 350/400 cc) meant that the competition vroomed ahead.

“HMCL’s market share in the 125+cc motorcycle segment declined from 12% in FY13 to 3% in FY23 due to lack of premiumisation-focused new product launches,” said a report by J M Financial.

Now, after taking time, and having signed a partnership with Harley Davidson, the bike maker is looking to bounce back. Hero’s launch pipeline has sporty or premium 125 110-125 cc motorcycles in the executive segment and they also plan another 125 cc scooter.

All these launches will spell good news, brokerages believe. “New launches in the scooter segment, Super splendor and Passion Plus are getting good traction and HMCL is ramping up Glamour 125 for rural demand and model launches in the premium segment should help market share gains,” said a report by Prabhudas Liladher.

The 2W demand pick up

The two-wheeler demand itself has been muted for years now due to a muted rural market. Yet, most players have indicated that greenshoots are being seen in demand with steady government spending in rural areas due to general elections next year.

As the market itself grows, HMCL with its new launches is expected to grow ahead of its peers. There is a huge replacement demand market in 2-wheelers which is expected to push sales. A few quarters back, the company was seeing replacement demand of 4-5%, and now it has reached 10%.

“HMCL is seeing indication of strong demand in the rural market and is aiming to grow ahead of the industry on back of aggressive model launch cycle across categories and gain market share,” said a report by Prabhudas Liladher.

It is also expanding the distribution of its EV two-wheeler Vida. It’s already present in 36 cities, and the count is expected to go to 100 by the end of the calendar year. It plans to launch new products from FY25 onwards.

Even as EV sales are currently muted, the company expects to reach leadership position in this segment in the coming years — but for the medium term its ICE brands are also expected to gain speed.

Hero’s Role to Play: $HEROMOTOCO.NSE Monthly chart of $HEROMOTOCO.NSE is showing us how the stock is trying to break above multi-year resistances. Here are my thoughts - 1. Long-term resistances is within (3150-3350) that comes from highs of Aug’17-Feb’21-Jul’23 (longer RED zone). Recently the stock did come close to this range without stretching itself in terms of momentum, ie, there is still some headroom. 2. Now at current price of 2935, the stock is consolidating its recent breakout above (2650-2850). This 200 point range is a crucial support now and as long as this holds, there is possibility of further upsides. 3. Immediate upside is the resistance band of (315-3350) beyond which one has to consider the upper border of a long-term rising channel (marked with BLUE), which comes to around (3700-3800). 4. But as per my experience, if the stock breaks & sustains above 3400, targets will fall short and a long term investor can expect multifold returns.

— (@AlphaPaul) September 04, 2023