Hero MotoCorp was top gainer among Nifty stocks on Thursday, Hero MotoCorp share prices ended the day with gains of 3.34% on the NSE.
The record festive sales recorded by the company supported the sentiments of investors. In its press release Hero MotoCorp said it recorded its highest ever festive sales, recording over 14 lakh (1.4 million) units in retail sales during the 32-day festive period – between the first day of the Navratras and Bhai Dooj – this one. a year
Riding on robust demand across rural markets as well as steady retail buying in key urban centres, the Company registered 19% growth over the previous year, surpassing its previous highest retail sales of 12.7 lakh units, which was recorded in the festive period of 2019.
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Hero MotoCorp’s strong festive sales are seen as good news considering concerns that have persisted about a pick-up in sales of entry-level two-wheelers for the industry as a whole. The Hero MotoCorp release also indicates that rural demand, which has lagged urban demand for the past few quarters, is showing improvement. This if sustained may help drive Hero’s performance over the coming quarters.
The wholesale shipments for the month of October already remained strong ahead of the festive season Hero MotoCorp recorded a 26% year-on-year increase in domestic volumes during October. Its Scooter volumes grew 30% yy; motorcycles grew 26% indeed. While eyes were on liquidation of inventory, Hero Motocrop’s strong sales performance during the festive season may mean that the volume growth may continue for months to come, say analysts.
Himanshu Singh – Research Analyst, Prabhudas Lilladher Pvt Ltd said that the liquidation of inventory by Hero is positive and the company can continue sales by filling channel inventory now. According to Singh’s estimates, the current inventory should be at about 4 weeks of sales compared to about six weeks of inventory that is normally kept in the channel.
Growth remained good for the industry and across regions, which is another key positive. Singh said while growth remained at 20% level last year during the festive season, 19% growth this year is another positive.
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Hero MotoCorp has indicated a pick up in rural demand, which is very encouraging according to Singh. However, it is the support of this demand that will hold the key. Rural demand hand supported the sales growth during months April May this year and even last year in the festive season but it did not continue afterwards.
On valuations the Hero MotoCorp is trading at its average forward one year earnings estimates. This because Singh means that while it may not be a significant amount, yet because the stock is not trading at a significant premium means there is also a cushion for the stock on the downside.
Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions
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Updated: 16 Nov 2023, 17:25 IST