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Hero Motors Shares Rally After Weak Debut; Targets and Risks
Hero Motors makes technology and powertrain parts for vehicle companies.
Its shares started trading below the IPO price earlier this week.
Since then, the stock has risen sharply for three straight sessions.
On Friday, it reached ₹141.85.
Investors are interested because the company may benefit from growth in two-wheelers and electric vehicles.
However, some analysts say the stock is expensive compared with similar companies.
They also point to lower profitability and dependence on major customers.
One analyst gave a target of ₹160–168, while another advised waiting for a better price.
Investors were given different stop-loss levels depending on their investment approach.
Hero Motors shares climbed as much as 20% to ₹141.85 on Friday, September 25, extending gains from the ₹84 IPO price to nearly 69%.
The stock had listed below issue price at ₹82 on the NSE and ₹82.10 on the BSE before gaining for three consecutive sessions.
Analysts cited Hero Motors’ powertrain business, automotive technology exposure and potential benefits from electric-vehicle growth as positive factors.
Concerns include a premium valuation of about 69–74 times price-to-earnings, below-peer profitability and high customer concentration.
Analyst targets range from ₹160–168, while suggested stop-loss levels range from ₹75–77 for existing investors to ₹118 based on technical analysis.
- Who
- Hero Motors and analysts from Master Capital Services, Swastika Investmart and Kantilal Chhaganlal Securities.
- What
- Hero Motors shares rallied sharply after a weak IPO listing, prompting analysts to discuss targets, valuation and stop-loss levels.
- Where
- The shares traded on the NSE and BSE; the company is expanding capacity at its facility in Gautam Buddha Nagar, Uttar Pradesh.
- When
- Friday, September 25, following the company’s listing on Wednesday, September 23.
- Why
- The rally followed strong recent trading momentum, while investors also considered the company’s powertrain business, automotive growth prospects and electric-vehicle opportunities.
Cautious view
Bullish view
Near-term investment approach
Cautious view
Master Capital Services and Swastika Investmart advised caution, citing the weak listing, premium valuation, profitability concerns and the need for price stabilisation or a better valuation.
Bullish view
Kantilal Chhaganlal Securities said the stock remains in a bullish trend, supported by positive technical conditions and strong volumes over the previous three sessions.
Business outlook
Cautious view
The company’s Return on Net Worth of 8.53% and EBITDA margin of about 10.2% remain below key peers, while customer concentration is a risk.
Bullish view
Hero Motors’ powertrain solutions, automotive technology operations and exposure to two-wheeler, gear, transmission and electric-vehicle growth could support longer-term expansion.
Price levels
Cautious view
Swastika Investmart maintained a neutral view, suggesting fresh investors wait and existing investors consider a ₹75–77 stop-loss.
Bullish view
Kantilal Chhaganlal Securities set a ₹160–168 target and identified ₹118 as the stop-loss based on the stock’s technical setup.
Key facts
- IPO price
- ₹84 per share
- Friday intraday high
- ₹141.85, up 20% during the session
- Listing prices
- ₹82 on the NSE and ₹82.10 on the BSE
- IPO size
- ₹1,000 crore
- IPO subscription
- 6.66 times during the three-day bidding period
- Valuation concern
- About 69–74x P/E versus a peer average of 50.2x
- Analyst target
- ₹160–168 from Kantilal Chhaganlal Securities
Quotes
Shivani Nyati
Head of Wealth at Swastika Investmart Ltd
“While the company benefits from a strong position in powertrain solutions and the growth potential of EVs, its valuation at around 69–74x P/E remains significantly higher than the peer average of 50.2x”
livemint.com
Sources
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