Last updated: 14 Aug, 2020 | 09:53 am
While the pandemic had brought the production and sales to a grinding halt in April, two-wheeler manufacturers have shown robust resilience in sales in the last two months. Hero has been able to deliver a positive bottom line, despite only 25% capacity utilization. This was due to cost optimization and improved productivity.
Nearly half of Hero’s domestic sales comes from rural India. Demand for entry-level motorcycles has recovered faster, especially in rural and semi-urban India, following a normal monsoon, good summer crop and a shift towards personal mobility over public transport to better practise social distancing. A good rabi crop forecast points to improving rural incomes, which should benefit the firm. Further, government focus on agriculture and the rural economy is likely to continue in the near- to medium-term, again a good tailwind for Hero.
Consensus recommendation: Hold (Based on views of 46 analysts from external institutions)