Hero MotoCorp vs TVS Motor: Which auto stock should you buy at this juncture? Experts weigh in | Stock Market News

Hero MotoCorp vs TVS Motor: November 2024 auto sales remained steady, despite the challenge of a high festive base this year, as the entire festive season occurred in October compared to being spread across these two months in 2023.

Two-wheeler (2W) dispatches recorded a 3 per cent year-on-year (YoY) growth, primarily driven by strong export sales, which surged 32 per cent YoY. In contrast, domestic dispatches remained flat. Key factors sustaining domestic demand include robust rural demand and the introduction of new models across segments.

TVS Motor (TVSL) stood out as the top performer in both domestic and export markets, maintaining its growth momentum. In contrast, Hero MotoCorp (HMCL) faced a dip in dispatches due to ongoing inventory correction, though underlying festive retail sales remained healthy, registering a 12 per cent YoY growth.

As the Indian two-wheeler industry gears up for future growth, investors face a critical choice between two prominent players—Hero MotoCorp and TVS Motor. While both companies hold strong positions in the market, let’s look at share price trends, financial performance, and expert recommendations in the current landscape.

Stock Price Trend

TVS has outperformed Hero Moto in 2024 so far. TVS has climbed 24 per cent on a year-to-date (YTD) basis, while Hero Moto has gained around 13 per cent during the same period. However, both companies underperformed the Nifty Auto index, which rose over 27 per cent in this period.

TVS has delivered positive returns in eight of the 12 months this year, while Hero has gained in just five.

Over the past year as well, both auto stocks delivered positive returns, with TVS rising 33 per cent and Hero Moto 24 per cent. In comparison, Nifty Auto advanced 33 per cent in this period.

Boosted by strong market sentiment and investor confidence, TVS reached an all-time high of ₹2,958.15 in September 2024. Currently, trading at ₹2514.30, the stock is 15 per cent below its peak. However, it has surged over 34 per cent from its 52-week low of ₹1,873.05, recorded in April 2024.

Meanwhile, Hero Moto also hit a record high of ₹6,245 in September. The stock now trades at ₹4647.65, almost 26 per cent away from its peak. That said, the stock has experienced an over 26 per cent rise from its 52-week low of ₹3,684.00, hit in December 2023.

Over the last three years, TVS has delivered multibagger returns, surging 280 per cent as against a 92 per cent rise seen in Hero Moto.

Hero Moto vs TVS Motor: A Comparative Look at Q2FY25 Earnings

Hero MotoCorp, the world’s largest two-wheeler manufacturer, reported a 14% year-on-year (YoY) rise in its net profit for the quarter ended September 2024 at ₹1,204 crore. The company’s revenue in Q2FY25 grew 11% YoY to ₹10,463 crore. At the operating level, EBITDA increased 14% YoY to ₹1,147 crore.

TVS Motor reported 23.5% growth in its standalone net profit at ₹662.6 crore for the quarter ended September 2024. The same stood at ₹536.5 crore in the year-ago period. Its revenue from operations during the reporting quarter rose 13% year-on-year (YoY) to ₹9,228.2 crore.

Hero Moto vs TVS Motor: Which auto stock should you pick?

As India’s two-wheeler industry navigates a dynamic phase of growth and transformation, both companies have demonstrated resilience and adaptability in a competitive market, but with shifting consumer preferences, expanding electric vehicle (EV) portfolios, and evolving rural-urban demand dynamics, the question arises: which stock is better positioned for long-term growth? Let’s find out.

Heet Chheda, Associate Choice Broking prefers Hero Moto over TVS.

Hero MotoCorp is a long-term growth story led by positive momentum in both rural and urban markets with rural recovery led by a good monsoon season. The company has several new product launches planned in the next six months, including ICE scooters, premium motorcycles, and EV models. Having seen a good response in the 125cc segment, particularly for the recently launched Xtreme 125R, the company has new premium products lined up for higher CC variants under the Xtreme brand.

Hero is also expanding its Premia store network, which is dedicated to selling premium motorcycles along with plans to increase investment in brand building and awareness for its premium brands. Hero strengthened its EV portfolio with the recent VIDA V2 series of electric scooters and plans to expand its EV portfolio to cover a wider range of price points and customer segments. Although TVS has a strong growth outlook, Hero MotoCorp presents better valuation comfort making it a comparatively attractive bet.

Nomura bullish on Hero Moto with buy rating but cautious on TVS with a neutral stance

The brokerage has a more optimistic outlook for Hero MotoCorp, assigning a ‘Buy’ rating with a target price of ₹5,805 per share. It highlighted rural demand improvement as a key growth driver, particularly as Hero derives 54 per cent of its sales from rural markets. Despite a challenging second quarter, Hero’s earnings growth remained healthy, with further margin expansion anticipated as the drag from electric vehicles (EVs) reduces through new models and Production Linked Incentive (PLI) benefits.

In contrast, Nomura has issued a ‘Neutral’ rating on TVS Motor, citing concerns over slowing industry growth and margin pressure. While TVS is expected to outperform the broader two-wheeler industry, elevated discounts are likely to weigh on average selling prices (ASPs), further impacting profitability. As a result, Nomura has lowered its EBITDA margin forecasts by around 50 basis points to 11.8 per cent for FY25 and 12.1 per cent for FY26. Additionally, the brokerage has revised its earnings per share (EPS) estimates downward by 7-8 per cent. However, higher export growth may partially offset weakness in the domestic market.

Anupam Roongta, Market Analyst, Share.Market also prefers Hero Moto over TVS.

According to Factor Analysis powered by Share.Market Research, both TVS Motors and Hero MotoCorp score 5/5 on Quality and 4/5 on Low Volatility. However, Hero MotoCorp scores better on Value whereas TVS Motors scores better on Momentum and Sentiment. These insights may be considered while picking between the two stocks for the long term.

Both Hero MotoCorp and TVS Motor are well-positioned in the two-wheeler market, but Hero’s diverse product portfolio, focus on premium segments, and rural market strength give it a competitive edge. Coupled with favourable valuation metrics and a bullish outlook from analysts, Hero MotoCorp appears to be the better pick for investors seeking long-term gains, as per experts.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.