Hero Motocorp — Q4 FY25 earnings call

Call held 14 May 2025

Management summary

Hero MotoCorp delivered a strong Q4 and full-year FY25 performance, achieving record revenue and profit, driven by disciplined fiscal management and strategic execution. The company maintained its market leadership, saw significant market share gains in the 125cc and EV segments, and expanded its global business. Strategic investments in Euler Motors and continued focus on product launches position Hero for sustained growth, despite a temporary production halt in April and ongoing EV segment investments impacting margins.

Highlights

  • Achieved highest-ever top line and bottom line for FY25.

  • Retained leadership as the world's largest manufacturer of motorcycles and scooters for 24 consecutive years.

  • Q4 FY25 revenue of ₹9,939 crores.

  • Q4 FY25 EBITDA of ₹1,416 crores.

  • Q4 FY25 PAT of ₹1,081 crores.

  • FY25 revenue of ₹40,756 crores, up 9% YoY.

  • FY25 EBITDA of ₹5,868 crores, up 12% YoY.

  • FY25 PAT of ₹4,610 crores, a growth of 16% YoY.

  • ICE EBITDA margin at 16.1% in Q4, 16.2% for FY25 (improved by 90 bps).

  • Global business grew 43% YoY in FY25, 2x industry growth.

  • Gained market share in EV business, exiting March at 7%, with 20%+ share in 30+ towns.

  • Acquired 34.1% stake in Euler Motors for ₹510 crores, entering EV three-wheeler category.

  • Declared total dividend of ₹165 per equity share for FY25, representing a payout of 8,250%.

Concerns

  • Temporary production halt from April 17-19, 2025, at four facilities, which impacted dispatches in April, though retail sales continued to grow.

  • EV business is currently at -95% EBITDA margin for FY25.

  • Associate profitability (subs contribution) inflated by a one-time gain of ₹170 crores from CCPS conversion to equity in Q4.

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹9,939 Cr
  • EBITDA
    ₹1,416 Cr
  • PAT
    ₹1,081 Cr
  • ICE EBITDA Margin
    16.1%
  • Overall EBITDA Margin
    14.2%
  • PAM Business Revenue
    ₹1,553 Cr
    YoY +11%

FY25

  • Revenue
    ₹40,756 Cr
    YoY +9%
  • EBITDA
    ₹5,868 Cr
    YoY +12%
  • PAT
    ₹4,610 Cr
    YoY +16%
  • ICE EBITDA Margin
    16.2%
  • Overall EBITDA Margin
    14.4%
  • Sales Volume
    5.9 Mn

What they filed

Q1 FY27: revenue up 35.7%, net profit up 29.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue10,463 10,211 9,939 9,579 12,126 +16%12,328 +21%12,797 +29%12,999 +36%
EBITDA1,516 1,476 1,416 1,382 1,823 +20%1,810 +23%1,856 +31%1,727 +25%
Net profit1,204 1,203 1,081 1,126 1,393 +16%1,349 +12%1,401 +30%1,454 +29%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • 100cc Category
    600 bps Market Share Gain (Q4 FY25)
  • 125cc Segment
    250 bps Market Share Gain (FY25)3,00,000 units Xtreme 125R Sales
  • EV Business
    200% Volume Growth (FY25)-95% EBITDA Margin (FY25)7% Market Share (March 2025)20% Market Share (30+ towns)10% Market Share (60+ towns)
  • Global Business
    43% Dispatches Growth (FY25)9% Market Share (FY25)

Capital allocation

high confidence
  • Capex Capex disclosed
    • Invest behind growth, premium, scooters and EV portfolio
    • Improve customer experience in stores with Hero 2.0 and Premia
    • Investment behind EV business (FY25) ₹630 Cr
    • Investment behind EV business (Q4 FY25) ₹143 Cr
    • Bring up a second Global Parts Center
    We'll continue to invest behind growth. We remain consistent in our commitment towards investing behind premium, scooters and EV portfolio; and to improve customer experience in stores with Hero 2.0 and Premia.
  • Dividend ₹65/share (final)
    I'm happy to share that the Company has declared a final dividend of 65 per equity share. Including the interim dividend of 100 per share, the total dividend for '24, '25 financial year amounts to 165 per equity share, representing a payout of 8,250%.
  • M&A Euler Motors Acquisition · Closed · Consideration ₹[object Object] (cash)

    Entry into fast-growing EV three-wheeler category, diversification into adjacent categories.

    Acquired 34.1% stake, making Euler Motors an Associate Company of Hero MotoCorp.

    I'm happy to share, this quarter, we acquired 34.1% stake in Euler Motors for an investment of 510 crores, which make Euler Motors an Associate Company of Hero MotoCorp. Through this, we have marked our entry into the fast-growing EV three-wheeler category.
  • Liquidity Liquidity disclosed Our continued focus on cash management resulted in delivering strong cash from operations, strengthening our financial performance.
    Our continued focus on cash management resulted in delivering strong cash from operations, strengthening our financial performance.

Guidance & targets

Volume

  • Industry Growth Volume · FY26 · High confidence mid- and high single digits
    Overall, we expect the industry to grow in the mid- and high single digits in FY '26.

    — Vikram Kasbekar

  • Industry Growth Volume · FY26 · High confidence around 6% to 7%
    Overall, this year, we expect the industry to grow in the region of around 6% to 7%, pretty much the same as last year.

    — Ashutosh Varma

Market Share

  • Hero MotoCorp Growth vs Industry Market Share · FY26 · High confidence outpace the industry growth and gain share
    And we are very confident that we'll outpace the industry growth and gain share.

    — Ashutosh Varma

Profitability

  • EBITDA Margin Profitability · High confidence between 14% to 16%
    And we have given a guidance to the market of maintaining our EBITDA margins between 14% to 16%, and directionally we will be there.

    — Vivek Anand

  • EV Business Breakeven Profitability · couple of years away · Medium confidence break even
    at a 25,000, 30,000 levels of volume per month, we hope that this will break even, which in our view is couple of years away.

    — Vivek Anand

Revenue

  • Parts Business Growth Revenue · current year · High confidence double-digit growth
    So while we are we had a good track record of almost hitting double-digit growth. And that's what certainly we are looking at as we look into the current year.

    — Vivek Anand

Market context

  • Global Business Market Share Market Share · 2025-26 · High confidence continue to gain market share
    So we are really confident about growing our global business and continuing to gain market share in 2025-26.

    — Vivek Anand

What to watch in Q1 FY26

Hero MotoCorp's volume growth vs industry growth

Next quarter (Q1 FY26) and subsequent quarters.
Current Management expects to outpace industry growth of 6-7% in FY26.
Target Hero's volume growth to outpace industry growth.

Why it matters

Verifies management's confidence in gaining market share and overcoming past underperformance.

Overall, we expect the industry to grow in the mid- and high single digits in FY '26.

Risks & concerns

  • Global turmoil, border situation, trade tensions

    medium

    Ongoing global turmoil, but domestic economy is on a positive note due to tapering inflation, lower interest rates, income tax cuts, and better monsoon expectations.

    Management acknowledged

  • EV investment impact on margins

    medium

    Continued investment in EV business (approx. ₹630 crores for FY25) impacts overall EBITDA margin, but management aims to maintain 14-16% range.

    Management acknowledged

  • OBD II and associated price increases

    low

    Little headwinds from OBD II and associated price increases, but overall industry growth expected to be 6-7%.

    Management acknowledged

  • Vehicle quality issues

    low

    Analyst raised concerns about quality post-BS VI, but management asserted that quality is paramount and they have not seen a drop-off.

    Analyst downplayed

  • Two-wheeler financing becoming tighter

    low

    Management stated retail finance penetration was 59% in Q4 and 63% for FY25, similar to last year, indicating no significant impact.

    Analyst downplayed

Q&A highlights

8 direct
125cc segment strategy and market share gain Direct
On a full year basis, we gained close to 250 basis points in terms of market share. Xtreme as a brand if you see, only on 125R, we sold close to 300,000 units.

Addresses how Hero plans to capitalize on its strong entry-level base for premiumization and gain share in the growing 125cc segment.

Asked by Vipul (HSBC)

Vehicle quality post BS VI and brand value Direct
The quality of our products is paramount to us. And our brand is built on the strength of the incredible value and quality that we deliver to our customers over the years. We have not seen a drop-off in any of those levels.

Addresses analyst concerns about potential quality degradation and its impact on brand value and warranty claims, which is critical for customer retention.

Asked by Vipul (HSBC)

Channel inventory levels post production halt Direct
Our channel inventory currently stands at around 4 to 5 weeks, but inventory is always forward looking. We know that, as we get up with the festive season, we will be able to step it up in accordance with what we expect out of the festive season, but we are sufficiently covered in terms of inventory currently at 4 to 5 weeks.

Clarifies the impact of the temporary production halt on inventory and confirms healthy levels for upcoming festive season, addressing potential supply chain concerns.

Asked by Chandramouli (Goldman Sachs)

EV business profitability and breakeven timeline Direct
at a 25,000, 30,000 levels of volume per month, we hope that this will break even, which in our view is couple of years away.

Provides a clear volume target and timeline for the EV business to achieve profitability, crucial for assessing the return on significant EV investments.

Asked by Amyn Pirani (JP Morgan)

Confidence in outperforming industry growth given past underperformance Direct
The confidence comes from the delivery that we've had in Quarter 4. If you look at the performance that we've had in Quarter 4: In the entry category, we gained 600 basis points in terms of market share. The confidence comes from the fact that we've over the year, we have recovered on 125cc strongly, gained 250 basis points there.

Explains the basis for management's confidence in outperforming the industry, citing recent market share gains in key segments.

Asked by Pramod Kumar (UBS Securities)

Associate profitability and one-time gains Direct
This time, we had a onetime gain of CCPS conversion to equity, right, in case of April. And that has translated into a onetime gain of 170 crores. So that's the one which has really inflated the profitability in our consolidated results for the quarter and for the full year.

Clarifies that a significant portion of the reported associate profitability was due to a one-time gain, providing a more accurate picture of underlying performance.

Asked by Gunjan (Bank of America)

Rationale for 34.1% stake in Euler Motors instead of majority Direct
I think as a category it offers us large value pool. It's a segment -- in terms of size, revenue size, it's 17,000 crores in last financial year; 6.4 lakh units. And this is projected to grow to 22,000 crores in the next 5 years. Also it provides an attractive profit pool of ₹2,300 crores. And this category has a EBITDA margin of 20%+, yes.

Explains the strategic rationale for entering the EV three-wheeler segment and the attractive market potential, even with a minority stake, aligning with diversification strategy.

Asked by Kapil Singh (Nomura)

Impact on HF Deluxe demand and customer shift Direct
What we saw was a lot of customers at the bottom of the pyramid coming under a large affordability stress. Used two-wheelers, for example, which used to be 1:1 of new two-wheeler sales, post COVID, immediately post COVID, actually rose to close to 1.5:1. I mean there were a substantial number of people who held onto their bikes longer.

Provides context on the decline in HF Deluxe volumes, attributing it to affordability stress and longer retention of existing vehicles post-COVID, rather than a direct shift to other segments like scooters.

Asked by Mihir Vora (Equirus)

3 min read 8 chapters

Detailed narrative

Q4 and FY25 Performance Overview

Hero MotoCorp reported a strong financial performance for Q4 and full year FY25, achieving its highest-ever top line and bottom line. For Q4 FY25, revenue stood at ₹9,939 crores, EBITDA at ₹1,416 crores, and PAT at ₹1,081 crores. For the full year FY25, revenue reached ₹40,756 crores (up 9% YoY), EBITDA ₹5,868 crores (up 12% YoY), and PAT ₹4,610 crores (up 16% YoY). The company maintained its leadership as the world's largest manufacturer of motorcycles and scooters for 24 consecutive years, selling 5.9 million vehicles in FY25.

Market Share and Product Strategy

The company demonstrated strong market share gains across key segments. In the 100cc category, Hero retained its leadership and gained 600 basis points in Q4. The 125cc segment saw significant recovery, gaining close to 250 basis points in FY25, driven by successful launches like the Xtreme 125R, which sold 300,000 units. New scooter launches, Xoom 125 and Destini 125 Xtec, were also positively received, contributing to market share increase.

EV Business and Strategic Investments

Hero MotoCorp's EV business showed significant growth, with volumes increasing by 200% in FY25. The EBITDA margin for the EV segment improved from -155% in FY24 to -95% in FY25. The company gained market share, reaching 7% by March 2025, with over 20% share in 30+ towns and 10%+ in 60+ towns. Strategically, Hero acquired a 34.1% stake in Euler Motors for ₹510 crores, marking its entry into the fast-growing EV three-wheeler category. Management expects the EV business to break even in a couple of years at a monthly volume of 25,000-30,000 units.

Global Business Performance

The global business segment delivered strong results, with dispatches growing 43% year-on-year in FY25, double the industry growth. This performance was broad-based, with growth across key markets including Bangladesh, Colombia, Nepal, and Mexico. The company exited FY25 with a 9% market share in global markets and aims to continue gaining market share in 2025-26.

Financial Management and Shareholder Returns

Disciplined fiscal management and cost savings, including LEAP savings and lower material costs, contributed to improved margins. The ICE EBITDA margin stood at 16.1% in Q4 and 16.2% for FY25, an improvement of 90 basis points. Overall EBITDA margin, after accounting for EV investments (approx. ₹630 crores in FY25), was 14.2% in Q4 and 14.4% for FY25, an improvement of 40 basis points. The company declared a total dividend of ₹165 per equity share for FY25 (₹65 final, ₹100 interim), representing an 8,250% payout.

Industry Outlook and Growth Drivers

Management projects the two-wheeler industry to grow in the mid- to high single digits (6-7%) in FY26, driven by positive economic momentum. Factors include tapering inflation, lower interest rates, income tax cuts, expectations of a better monsoon, and a strong marriage season in May and June. Hero MotoCorp is confident in outperforming industry growth and gaining market share, supported by its product launches and brand investments.

Production Halt and Inventory Management

Hero MotoCorp implemented a temporary production halt from April 17-19, 2025, at four facilities for supply chain realignment, scheduled maintenance, and infrastructure enhancements. While this impacted April dispatches, retail sales continued to grow. Channel inventory currently stands at 4-5 weeks, which management considers sufficiently covered for the upcoming festive season.

Quality and Customer Experience

Addressing analyst concerns about vehicle quality post-BS VI, management emphasized that product quality is paramount and a core strength of the brand. They stated that there has been no drop-off in quality levels and that technology is being utilized in R&D to address all quality aspects, from customer experience to manufacturing and design.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Automobile and Auto Components earnings calls