It is pouring earnings upgrades for Hero Motocorp Ltd, following its decent September quarter (Q2FY26) earnings performance.
Remember, operational challenges had disrupted the auto maker’s business in the first quarter. But, now investors took comfort from better-than-expected revenue growth of around 16% to ₹12,126 crore driven by sustained recovery in rural demand amid new product launches. The stock rose 4% and hit a new 52-week high of ₹5,780 on Monday.
Among the highlights, Hero delivered a second straight quarter of market-share gains in its core 100–125cc motorcycle segment. After years of underperformance in a premium-tilted market, a sustained rural revival this fiscal has played to Hero’s strengths.
Its entry-level workhorses, Splendor and Passion, helped deliver 11% year-on-year volume growth and a 4% rise in realisations. As the industry share of entry-level motorcycles rose from 7.9% in Q4FY25 to 9.2% in Q2FY26, Hero extended its lead through new launches and strong momentum in exports and electric vehicles (EVs). Festive-season market share rose 40 basis points year-on-year.
Product gains
While Splendor continues to anchor demand, newer launches such as HF Deluxe Pro and Glamour X have bolstered the portfolio. Premium model XPulse recorded a 31% rise in volumes.
Exports surged 77% year-on-year—three times industry growth. Scooters, which form around 7% of Hero’s volumes, grew 39%, lifting its entry-level scooter share to 10%.
EV momentum remains robust: the VIDA Vooter VX2 has helped Hero gain 6.8% of EV market share in a year. Hero now commands 11.7% of the overall EV market and over 20% in top-tier cities.
Margin lift
Higher revenue and operational efficiencies pushed Ebitda margin up 50 bps to 15%; gross-margin remained flat on mixed raw-material trends. The full impact of GST 2.0-propelled festive demand was witnessed in October when Hero logged 1 million in retail sales, and expanded its market-share to 31.6%. Taking cues from excise-cuts of the past, the management expects GST-benefits to boost demand for the next 2-3 years.
The industry is expected to clock 8-10% growth in H2FY26. Subject to sustained rural recovery, Hero’s fortunes should be supported by new launches and a growing pool of first-time buyers. While exports had contributed 5% to volumes in FY25, higher traction can be expected from steady demand in key markets like Bangladesh, Nepal, and Sri Lanka, as well as fresh strides in European and UK markets with Hero’s new Euro5+ compliant portfolio.
Valuation and risks
The stock has jumped nearly 30% since July, outperforming the Nifty Auto Index’s 15%. Still, Hero had fallen out of favour in the post-pandemic premium boom, resulting in a five-year CAGR of just 13%, half the auto index. Valuation at 19.6x P/E based on Motilal Oswal’s FY27 estimates, does not look demanding.
However, risks linger.
Intense competition in the EV space and developments under the new CEO in 2026, will need to be closely watched.
“Post GST cut, we had revised up FY26 two-wheeler growth forecast to 10% (from 5%). However, the demand pull is lower so far based on our channel checks,” said Nomura Global Markets Research report dated 15 November.
It has reduced Hero’s volume growth estimates to 6%/5.6%/5% for FY26/27/28F. “We see a risk that anti-lock braking system implementation could impact the 100cc segment more (~87% of sales for Hero),” it added.
