Improving premiumisation to help Hero Moto stay ahead on growth track
Hero Motocorp is back on investors’ radar driven by rising conviction on premiumisation led earnings growth and higher two-wheeler volume growth on a low base. This is likely to offset the concern about a drop in the market share in the medium term.
The stock has outperformed the Nifty 50 index by 22% in the past six months after underperforming by 37% in the previous three years.
The share of premium bikes for India’s largest two-wheeler maker has been rising, establishing its positioning in the premium segment through Karzima and Harley-Davidson bikes. The premium variant in the 125cc bike segment Xtec contributed about 30% to its total portfolio in the September quarter driven by its largest selling bikes Splendor and Glamour.
Due to the rising share of premium variants and higher product prices, the company’s average selling price per unit was Rs 66,680 in the second quarter of FY24, the highest ever and around Rs 7,000 per unit from the beginning of the last fiscal year.
The company plans to strengthen its position in the 125cc bike segment with new model launches in the next two years.
The focus on premiumisation helped the company to deliver one of the highest operating profit per vehicle despite 1% drop in the total volume in the September quarter. In addition, the company is revamping its existing stores to ‘Hero 2.0’ showroom to give more premium experience to customers.
The store count in this format has reached 200 stores, which is expected to increase to 500 in the next six months.
In the premium segment, the company has received bookings of 25,000 units for Harley-Davidson 400x in the first four months after launchand 14,000 units for Karizma. It has delivered around 2000 units of 400x bikes so far.
