HEROMOTOCO - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 4.3

📊 Core Financials:

- Quarterly PAT at ₹1,393 Cr vs ₹1,126 Cr previously → strong growth.

- Excellent profitability with ROCE at 31.5% and ROE at 23.8%.

- Debt-to-equity ratio at 0.01 → virtually debt-free.

- Cash flows remain robust, supported by consistent earnings and dividend yield of 2.84%.

💹 Valuation Indicators:

- Current P/E: 24.1 vs Industry P/E: 29.6 → fairly valued, slightly cheaper than peers.

- P/B ratio: ~5.5 (₹5,780 / ₹1,051) → moderate.

- PEG ratio: 1.04 → valuation aligned with growth.

- Intrinsic value close to CMP, suggesting balanced valuation.

🏢 Business Model & Competitive Advantage:

- Hero MotoCorp is India’s largest two-wheeler manufacturer with strong rural and urban presence.

- Competitive advantage lies in brand leadership, wide distribution, and cost-efficient manufacturing.

- Market cap of ₹1,15,637 Cr reflects scale and dominance in the sector.

📈 Entry Zone & Long-Term Guidance:

- CMP ₹5,780 is near DMA 50 (₹5,778) and above DMA 200 (₹5,080), showing strength.

- RSI at 39.4 indicates near oversold zone, offering accumulation opportunity.

- Suggested entry zone: ₹5,600–₹5,750.

- Long-term holding recommended due to strong fundamentals, attractive dividend yield, and leadership position.

Positive

• Strong ROCE (31.5%) and ROE (23.8%).
• Debt-free balance sheet (Debt-to-equity 0.01).
• Attractive dividend yield of 2.84%.
• Quarterly PAT growth of 15.7%.

Limitation

• P/B ratio at ~5.5 indicates premium valuation.
• DII holding reduced by -1.45%.
• High dependence on two-wheeler segment, limited diversification.

Company Negative News

• Decline in DII holdings (-1.45%).
• Competitive pressure from EV entrants.

Company Positive News

• FII holdings increased by 1.71%.
• Strong quarterly PAT growth (₹1,393 Cr vs ₹1,126 Cr).

Industry

• Automobile industry is recovering with strong demand for two-wheelers.
• Industry P/E at 29.6 indicates sector is moderately valued compared to Hero MotoCorp’s 24.1.

Conclusion

⚖️ Hero MotoCorp is financially strong with excellent return ratios, negligible debt, and attractive dividend yield. Valuations are fair compared to industry peers, making it a solid long-term investment. Entry is favorable around ₹5,600–₹5,750, with potential for sustained growth driven by strong fundamentals and market leadership.