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Budget 2016: Hero Motor back in demand on Budget’s Rural Thrust

Budget 2016: Hero Motor back in demand on Budget’s Rural Thrust

Budget 2016 : The stock of world’s largest motorcycle manufacturer Hero MotoCorpBSE 0.81 % is once again on investors’ radar, thanks to the government’s impetus to stimulate the rural sector, a key market for the company. It is also gaining a foothold in scooter segment — the fastest-growing twowheelers segment.

Hero Moto’s stock has outperformed the BSE Auto index by 14% since January after being an underperformer in the past two years.

It is among the few stocks in the Nifty, which have not broken their low of August 2013. This is the prime reason why traders have been accumulating the stock over the past three months.

The stock is trading at 22% premium to the BSE Auto index based on projected FY17 earnings growth compared with 37.4% average premium in the past five years, according to Bloomberg data.

The company reported 22% earnings growth in the nine months to December 2015 despite 3% decline in the volumes. This shows that it has multiple levers to drive profitability. Gross margins improved — for the sixth quarter in a row — to 33.1% in the December quarter.

Hero is also gaining foothold in the scooter market by introducing new models such Maestro Edge and Duet.

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