Hero MotoCorp shares get Jefferies upgrade but margin worries keep UBS cautious

Shares of Hero MotoCorp Ltd. opened higher on Thursday, May 7, extending gains for a second straight session, after brokerages reacted to the company's March quarter earnings.

The stock got a boost after Jefferies upgraded Hero MotoCorp from 'Underperform' to 'Hold', while keeping its price target unchanged at ₹5,000.

The brokerage said that the company's March quarter EBITDA and PAT grew a strong 30-31% YoY, in line with its estimates. Two-wheeler demand remains resilient, with Jefferies projecting an 8% industry volume CAGR over FY26-29.

While Hero continues to face a challenging demand mix shift, it has reclaimed some market share in the 110-125cc bike and ICE scooter segments in the second half of FY26. Its electric vehicle franchise is also showing signs of improvement.

With the stock having corrected recently, Jefferies views its valuation at 17x FY27E PE as reasonable, and finds the 4% dividend yield attractive.

ALSO READ | Why Hero MotoCorp shares fell over 5% from the highs after the earnings call

BofA Securities, meanwhile, reiterated its 'Buy' rating but trimmed its price target to ₹6,150 from ₹6,250.

The brokerage believes Hero is heading in the right direction, backed by efforts to plug white spaces, targeted brand investments, and a sharper EV focus. However, it flagged that margin headwinds have intensified due to a rally in metal prices, particularly aluminium, which could weigh on revenues by as much as 4-5%.

Despite price hikes of around 2% and cost control measures, BofA Securities expects near-term margins to remain under pressure, especially in the first half. This puts the company's medium-term EBITDA margin guidance of 14-16% at risk for FY27.

That said, the brokerage sees a favourable risk-reward at current levels, citing that a valuation of 15x FY28E PE limits downside, while market share momentum could trigger a re-rating.

New launches and market share trends remain the key catalysts to watch.

UBS retained its 'Sell' rating with a marginally revised price target of ₹4,825, up from ₹4,800 earlier. The slight uptick in target price reflects a mark-to-market adjustment on its Ather Energy stake and a valuation roll-forward to FY28E earnings.

The brokerage values the core autos business at 10x one-year forward EV/EBITDA, assigning ₹420 to the stake in subsidiaries and associates.

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