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Hero MotoCorp: Undervalued Gem in Booming Auto Sector?
27 May
Summary
- Two-wheeler sales growth continued through the March 2026 quarter and into April 2026.
- GST cuts and lower interest rates have significantly boosted two-wheeler demand.
- Hero MotoCorp trades at the lowest P/E ratio compared to peers, suggesting undervaluation.
Two-wheeler sales have experienced robust growth, extending from the December 2025 quarter through April 2026. This surge is attributed to earlier GST reductions and favorable interest rates on auto loans. Companies like Hero MotoCorp, Bajaj Auto, and TVS Motor Company have reported strong performance, with their stocks reaching 52-week highs. Hero MotoCorp, in particular, is trading at a P/E ratio of 18.6 times, significantly lower than Bajaj Auto's 30.2 and TVS Motor's 44.9. This valuation suggests Hero MotoCorp may be an undervalued stock for investors to consider for 2026.
Hero MotoCorp's sales grew 24.1% year-on-year in the March 2026 quarter, driven by its popular motorcycle and scooter segments, including a significant 190% year-on-year increase in VIDA electric scooter sales in FY26. Bajaj Auto saw a 24.3% sales increase, boosted by its Pulsar range and the Chetak C25 electric scooter. TVS Motor Company reported a 28.3% sales increase, with its EV sales growing by 51% year-on-year in the same quarter.
Despite headwinds like rising input costs and potential impacts from fuel price hikes and El Nino, the companies are pressing forward with new product launches for FY27. Hero MotoCorp plans over 12 launches, including the Karizma XMR 250, while Bajaj Auto and TVS Motor are also set to introduce new models and electric variants. Investors are watching how these companies manage costs and capitalize on new offerings.
