Hero MotoCorp to hike prices from Dec 1; stock surges 2%

Shares of the country’s largest two-wheeler company Hero MotoCorp surged as high as 4% to ₹2,804 on Monday's intra-day trade after the two-wheeler major announced its plans to increase motorcycle prices by up to ₹1,500 from December 1, 2022.

The shares of the New Delhi-based company opened a gap up at ₹2,711.05 during the early trade and touched the day's high at ₹2,804 apiece. At 1.26 PM today, the stock was trading 2.12% up at ₹2,765.65 on NSE. The auto stock has surged 3.16% in the past week; 4.16% in the past month; and 11.44% in the year-to-date period. In contrast, BSE benchmark Sensex surged 5.88% to 62,655.70 in the year-to-date period.

Hero MotoCorp has attributed overall inflationary costs as the reason for increasing vehicle prices. "Hero MotoCorp will make an upward revision in the ex-showroom prices of its motorcycles and scooters, effective from December 1, 2022. The price increase will be up to ₹1,500 and the exact quantum of increase will vary by specific models and markets," the company said.

“The upward revision of the prices of our motorcycles and scooters has been necessitated due to overall inflationary costs," said Niranjan Gupta, chief financial officer (CFO), Hero MotoCorp.

Gupta said the company is providing innovative financing to cushion the impact on the customers. "We have also put in place accelerated savings programs, which will help us to offset any further cost impact, and drive improvement in margins." He said moving forward, the economic indicators suggest there'll be a growth in demand and industry volumes will pick up in coming quarters.

This fiscal year, Hero MotoCorp has hiked prices on two occasions -- by up to ₹3,000 crore in July and ₹1,000 in September -- in view of the rise in input costs.

The company sold 14.28 lakh units of motorcycles and scooters in Q2 (July-September) FY23. Its quarterly income had grown 7.4% YoY to ₹9,075 crore and its EBITDA stood at ₹1,038 crore. Hero's profit after tax was recorded at ₹716 crore. In the first half of the fiscal year, its earnings rose 25.3% to ₹17,468 crore, with total units sold during the quarter at 28.18 lakh. EBITDA for H1 FY23 stood at ₹1,979 crore, while profit was recorded at ₹1,341 crore.

As per the Federation of Automobile Dealers Association (FADA), the two-wheeler segment — which has borne the brunt of pandemic-induced disruptions — showed a growth of 6% in October month when compared to October 2019 — a pre-pandemic year. A total of 15,71,165 two-wheelers were sold in October, growing, for the first time, post-pandemic by 6%.

The national body says on a more immediate level, farmers will start receiving their crop realisations, and the overall sentiment continues to show some headwinds — especially in the two-wheeler rural segment. FADA adds that for auto retails to show strength, the two-wheeler segment will have to grow for at least three-four months over pre-pandemic months to come out of the woods.