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MOSL: HERO MOTOCORP (Neutral)- Annual Report Update-Expect industry growth of 5-7% in FY20-Aspiring for leadership in EVs via internal programs

Hero MotoCorp | Annual Report Update: Expect industry growth of 5-7% in FY20; Aspiring for leadership in EVs via internal programs and stake in Ather

(HMCL IN, Mkt Cap USD6.9b, CMP INR2388, TP INR2636, 10% Upside, Neutral)

 

Our analysis of Hero MotoCorp's (HMCL) FY19 annual report highlights the company's outlook for the two-wheeler (2W) industry, its strategic focus and update on key export markets. Key insights from the annual report:

HMCL expects the domestic 2W industry to grow 5-7% in FY20 (v/s our estimate of 2-3% growth in FY20).

• The company plugged gaps in its product portfolio - 125cc scooter and premium motorcycles - in FY19.
• The recently launched Destini 125cc scooter has become the fastest growing scooter brand in India surpassing ~100k unit sales in just 26 weeks. Destini currently has ~20% market share in the 125cc scooter segment.
• With the electric vehicle (EV) segment picking up, HMCL expects a structural shift in competition with many new players entering the EV space and challenging the traditional companies. It is aspiring for leadership in the EV 2W space and is approaching this opportunity by pursuing its internal EV program, in addition to partnering with Ather.
• It is witnessing a trend of scooterization and premiumization in the export market, particularly in the SAARC region.
• The company has continued to focus on improving its competitive positioning in key export markets by expanding network and improving value proposition for customers through products and offerings (including financing). For e.g., it plans to revamp its product portfolio and distribution in Africa in FY20.