Why is Hero MotoCorp falling/rising?

Consistent Outperformance Against Benchmarks

Hero MotoCorp’s recent price appreciation is underpinned by its impressive returns relative to the broader market. Over the past week, the stock surged by 4.43%, significantly outperforming the Sensex’s modest 0.50% gain. This momentum extends over longer periods, with the company delivering a 10.78% return in the last month compared to the Sensex’s 1.66%. Year-to-date, Hero MotoCorp’s stock has soared by 47.41%, dwarfing the benchmark’s 9.56% rise. Even over a five-year horizon, the stock has appreciated by 102.92%, outpacing the Sensex’s 93.43% growth. Such consistent outperformance highlights strong investor confidence in the company’s prospects and operational resilience.

Technical Strength and Market Sentiment

On the technical front, Hero MotoCorp hit a new 52-week high of ₹6,144.35 on 26-Nov, signalling robust buying interest. The stock has been on a two-day winning streak, delivering a 2.54% return in this period. It is trading comfortably above all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, which typically indicates a bullish trend. Despite a slight underperformance relative to its sector by 0.26% on the day, the overall technical indicators suggest sustained upward momentum.

Strong Fundamental Performance Driving Investor Confidence

The rise in Hero MotoCorp’s stock price is firmly rooted in its solid fundamental performance. The company boasts an average Return on Equity (ROE) of 20.04%, reflecting efficient capital utilisation. Its net sales have grown at an annual rate of 10.29%, while operating profit has expanded at 17.46%, signalling healthy business growth. Notably, the company maintains a low average debt-to-equity ratio of zero, underscoring a conservative capital structure that mitigates financial risk.

Recent financial results have been particularly encouraging. Over the latest six months, the company’s Profit After Tax (PAT) reached ₹3,014.18 crores, marking a robust growth of 42.88%. The Return on Capital Employed (ROCE) for the half-year stood at an impressive 32.40%, while quarterly net sales hit a record high of ₹12,218.39 crores. These metrics demonstrate operational efficiency and strong demand for Hero MotoCorp’s products, which have likely contributed to positive investor sentiment.

Valuation and Institutional Support

Hero MotoCorp’s valuation metrics further support its stock price appreciation. With an ROE of 25.2 and a Price to Book Value of 5.8, the stock is considered attractively valued relative to its peers and historical averages. Over the past year, the company’s profits have grown by 27.7%, closely aligned with its 26.84% stock return, resulting in a favourable Price/Earnings to Growth (PEG) ratio of 0.8. This suggests that the stock’s price growth is justified by earnings expansion, making it appealing to value-conscious investors.

Institutional investors hold a significant 55.15% stake in Hero MotoCorp, indicating strong backing from sophisticated market participants who typically conduct rigorous fundamental analysis. This high level of institutional ownership often provides stability and confidence in the stock’s prospects.

Consistent Long-Term Returns and Market Recognition

Hero MotoCorp’s consistent delivery of returns over multiple time horizons has reinforced its reputation as a reliable growth stock. The company has outperformed the BSE500 index in each of the last three annual periods, with a three-year return of 126.63% compared to the benchmark’s 37.43%. This sustained performance has earned it a place among the top 1% of companies rated by MarketsMojo, ranking fourth among Mid Cap stocks and fifth across the entire market. Such recognition reflects the company’s strong fundamentals, operational excellence, and investor appeal.

While investor participation has seen a decline, with delivery volumes falling by 31.55% against the five-day average as of 25 Nov, the stock remains sufficiently liquid to support sizeable trades, with a tradable value of approximately ₹12.31 crores based on 2% of the five-day average traded value. This liquidity ensures that investors can enter or exit positions without significant price disruption.

In summary, Hero MotoCorp’s stock price rise on 26-Nov is driven by a combination of strong financial results, attractive valuation metrics, robust technical indicators, and sustained institutional interest. The company’s ability to consistently grow profits and sales while maintaining a conservative balance sheet has fostered investor confidence, positioning the stock favourably within the competitive automobile sector.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →