UBS, a global brokerage firm, has kept its ‘sell’ rating on Hero MotoCorp shares, predicting a 45% drop with a target price of ₹3,350. The stock is currently trading at ₹6,049.35, and although it has surged over 102% in the past year, UBS believes it is overvalued, trading at around 26 times its expected earnings for 2026, which is significantly higher than its five-year average.
Despite a strong boost in stock price following its Q1 FY25 earnings call, UBS has concerns about Hero MotoCorp’s long-term retail performance. While the company might see a rise in wholesale sales during the upcoming festive season, its declining market share and high inventory levels raise red flags. Increased competition and changing consumer preferences are also challenges for the company.
In the past six months, the stock rose over 46%, hitting a record high of ₹6,245 earlier this week. However, UBS points out that the rally might not reflect retail sales trends. They note that expected wholesale volumes for September may exceed 600,000 units, but retail sales are lagging at about 300,000 units, leading to excess inventory.
Hero’s retail market share has been steadily declining, predicted to fall below 24% by September 2024, which is concerning. Even with successful new product launches, the company faces intense competition, particularly in the commuter motorcycle segment.
Overall, while Hero MotoCorp may see short-term benefits from increased wholesale volumes, UBS emphasizes that the company must address long-term challenges related to retail performance and market share.
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