Rising Urbanization In India And EV Adoption Will Transform Mobility

Key Takeaways

• Hero's innovative product launches, distribution expansion, and enhanced financing access are driving strong market share gains and structurally higher revenue growth.
  
• Rapid EV and export business expansion position Hero for outsized growth, improved margins, and reduced reliance on domestic market cycles.
  
• Heavy reliance on internal combustion two-wheelers and the domestic market, combined with slow EV transition and rising competition, threatens profitability and growth sustainability.

Catalysts

Primarily engages in the manufacture and sale of motorised two wheelers in India, Asia, Central and Latin America, Africa, and the Middle East.

• Analyst consensus already credits Hero's premiumization strategy and product launches for margin and revenue growth, but this view fails to capture the accelerating velocity of share gains in both premium and value segments-recent innovations and new launches indicate Hero is set not only to outpace but fundamentally reshape segment leadership, directly driving outsized market share-led revenue and earnings upside.
  
• Analysts broadly acknowledge Hero's commitment to building EV leadership; however, the rapid expansion of Battery-as-a-Service and robust EV pipeline, alongside deepening market penetration in urban and rural areas, suggests Hero is positioned to capture disproportionate share as EV adoption inflects in India-underpinning a step-change in revenue growth and structural improvement in margins as EV scale accelerates well ahead of market expectations.
  
• Hero's aggressive focus on building a vast multi-channel network, now covering over 6,000 sales and service points and expanding rapidly, creates a powerful distribution moat-this positions the brand to fully capitalize on rising urbanization, increasing two-wheeler demand, and surging first-time buyers, translating to structurally higher volume growth and sustained gains in market share.
  
• The combination of expanding fintech solutions and digital payment accessibility is making two-wheeler financing dramatically more available across India, and with Hero's captive financing arm seeing improving credit quality, this removes major friction in the sales funnel and is set to unleash incremental demand, fueling both top-line revenue growth and improving asset quality at Hero FinCorp.
  
• Hero's international business is seeing accelerating export growth with a focus on 10–12 key markets and products tailored to local needs-this not only diversifies revenue and reduces India-specific cyclicality, but the sustained 40% export growth run-rate points to a meaningful longer-term step up in consolidated revenue, earnings stability, and lower forex risk.

Hero MotoCorp Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Hero MotoCorp compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Hero MotoCorp's revenue will grow by 13.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 12.5% today to 12.0% in 3 years time.
• The bullish analysts expect earnings to reach ₹70.2 billion (and earnings per share of ₹351.35) by about September 2028, up from ₹50.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 29.9x on those 2028 earnings, up from 21.2x today. This future PE is lower than the current PE for the IN Auto industry at 34.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 18.61%, as per the Simply Wall St company report.

Hero MotoCorp Future Earnings Per Share Growth

Risks

• The accelerating global shift toward electric mobility and increasingly stringent regulations on internal combustion engine vehicles pose a risk to Hero MotoCorp, as their ICE two-wheeler segment still accounts for a majority of revenues, potentially leading to long-term revenue decline if EV transition execution lags competitors.
  
• Hero MotoCorp remains heavily dependent on the Indian market, with limited international diversification, which exposes the company to domestic macroeconomic or regulatory disruptions that could lead to earnings volatility and net margin pressure.
  
• The entry-level two-wheeler segment, a core market for Hero MotoCorp, is described as structurally challenged by affordability issues and aspirational shifts, while growing urbanization and improving public transport further dampen demand, threatening top-line growth and market share in years ahead.
  
• Despite recent gains, the company lags behind several agile competitors in EV innovation and penetration, and ongoing high investment requirements in EVs-combined with low initial margins and heavy R&D-could pressure near-term profitability and hamper net earnings growth if margin improvement in the EV portfolio is slower than anticipated.
  
• Intensifying domestic and international competition, especially from new and established EV-focused manufacturers as well as tiered OEMs, is leading to pricing pressure and the need for significant ongoing investment in technology and channel, risking Hero MotoCorp's market share and sustained net margin levels.

Valuation

• The assumed bullish price target for Hero MotoCorp is ₹6287.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Hero MotoCorp's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹6287.0, and the most bearish reporting a price target of just ₹3630.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ₹584.1 billion, earnings will come to ₹70.2 billion, and it would be trading on a PE ratio of 29.9x, assuming you use a discount rate of 18.6%.
• Given the current share price of ₹5348.65, the bullish analyst price target of ₹6287.0 is 14.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.