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    Hero Motocorp

    HEROMOTOCO
    Automobile and Auto Components·6 May 2026
    Management Summary

    Hero MotoCorp delivered its highest-ever financial performance in FY26, driven by strong growth in scooters, EVs, and global business. Q4 FY26 saw robust revenue and profit growth, with ICE EBITDA margins expanding. However, the company faces short-term margin pressure from commodity headwinds, which are not fully offset by recent price hikes, and continues to invest significantly in its EV portfolio and capacity expansion.

    Highlights

    5

    • FY26 marked highest ever topline and bottom line, maintaining leadership as world's largest 2-wheeler manufacturer for 25 consecutive years.

    • Q4 FY26 revenue reached ₹12,797 crores, a 29% YoY growth, with EBITDA at ₹1,856 crores (up 31% YoY) and PAT at ₹1,401 crores (up 30% YoY).

    • ICE business EBITDA margin expanded by 100 bps YoY to 17% in Q4 FY26, driven by pricing, LEAP savings, and operating leverage.

    • Strong growth in focus segments: scooters up 48% YoY, EV volumes expanded 2.5x YoY, global business grew 41% YoY, and Harley-Davidson range grew 26% YoY.

    • Generated strong cash flow from operations of ₹9,395 crores for FY26, an 80% YoY increase, and declared highest ever total dividend of ₹185 per share for FY26.

    Concerns

    4

    • Commodity headwinds, including metals, gas, and labor costs, began in March and are expected to have a transitionary impact on margins in the short term.

    • Price hikes of approximately 2% do not fully cover the high single-digit BOM cost increase, leading to a 100 bps gross margin drop in Q4 FY26.

    • The EV business is still in a build-out and investment phase, incurring losses, though EBITDA losses per unit are decreasing quarter-on-quarter.

    • Overall retail market share has seen a slight decline due to the business mix, despite gains in specific growth categories.

    Key financials

    Metrics

    9

    Periods

    2

    Q4 FY26

    5
    • Revenue
      ₹12,797 Cr
      YoY+29.0%
    • EBITDA
      ₹1,856 Cr
      YoY+31%
    • PAT
      ₹1,401 Cr
      YoY+30%
    • ICE Business EBITDA Margin
      17%
    • Overall EBITDA Margin
      14.5%

    FY26

    4
    • Revenue
      ₹46,830 Cr
      YoY+15%
    • EBITDA
      ₹6,871 Cr
      YoY+17%
    • PAT
      ₹5,268 Cr
      YoY+14.0%
    • Cash Flow from Operations
      ₹9,395 Cr
      YoY+80%

    Segment breakdown

    Scooters
    48% Volume Growth (Q4 FY26)
    EV
    2.5x Volume Expansion (Q4 FY26)
    Global Business
    41% Wholesale/Dispatch Growth (Q4 FY26)
    Harley-Davidson Range
    26% Sales Growth (Q4 FY26)
    Exports
    ₹3,500 Cr Revenue (FY26)4,02,000 Units (FY26)
    List

    Capital allocation

    4
    high confidence
    CategoryHeadline
    Capex

    ₹1,500 crores

    Dividend

    ₹75/share (final)

    Payout ratio 70.0%

    M&A

    Euler Motors

    joint venture · closed · Consideration ₹NaN (cash)

    Liquidity

    Liquidity disclosed

    Strong cash flow from operations of ₹9,395 crores for FY26, an 80% YoY increase, driven by working capital improvements.

    Guidance & targets

    11
    CategoryTargetPriority
    Volume
    Industry Volume Growth
    High single-digit
    		High
    Volume
    Hero MotoCorp Volume Growth
    Outgrow industry
    		High
    Volume
    First Half FY27 Growth
    Stronger
    		High
    Margin
    EBITDA Margin
    14% to 16%
    		High
    Capex
    Total Capex
    Over ₹1,500 crores
    		High
    Capacity
    EV Capacity Expansion
    Double capacity from last year, then further doubling
    		High
    Capacity
    Xoom Scooter Capacity
    Doubling capacity
    		High
    Capacity
    Destini Scooter Capacity
    Increased by 50%
    		High
    PLI
    PLI Coverage of Portfolio
    Almost 90%
    		High
    Dealer Inventory
    Overall Dealer Inventory
    Around 5 weeks
    		High
    Dealer Inventory
    EV Dealer Inventory
    Single-digit days
    		High

    EV Capacity Doubling

    Within a month (from May 6, 2026)
    CurrentApprox. 15,000 units/month (last year's base)
    TargetApprox. 30,000 units/month (doubled capacity from last year)

    Why it matters

    Verifies the immediate capacity ramp-up to support the high-growth EV segment and meet increasing demand.

    on EV, we have we are close to completing an expansion, which will effectively get us 50% more capacity than the last quarter. So within a month, we'll be at a 50% more capacity than last quarter. And then further down the road in a few quarters, there will be further doubling of capacity as we are seeing great momentum for our VIDA brand. ... So the EV will see another doubling by end of this year is what you're saying? That's right.

    How to verify

    capital_allocation.capex.purposes[description='EV capacity expansion']

    Risks & concerns

    5
    RiskSeverity

    Commodity Headwinds and Macro Environment

    Developments in West Asia impacting commodity costs (metals, gas, labor) leading to transitionary margin impact. — Management acknowledged

    medium

    Incomplete Offset of BOM Cost Increase

    Price hikes of ~2% do not fully cover the high single-digit BOM cost increase, leading to margin pressure. — Management acknowledged

    medium

    EV Business Losses

    EV business is still in an investment and build-out phase, incurring losses, though per-unit losses are decreasing. — Analyst acknowledged

    medium

    Overall Retail Market Share Decline

    Overall retail market share has come down due to business mix, despite gains in specific growth segments. — Analyst acknowledged

    medium

    Draft EPR Notification

    Evolving regulatory stage, difficult to quantify impact, under industry discussion. — Analyst not addressed

    medium

    Q&A highlights

    8

    “As Vivek mentioned, industry expects high single-digit volume growth in FY '27. And it's a combination of both growth in motorcycles as well as scooters. Having said that, we do expect scooters to grow a couple of points more than motorcycles. So high single digit with a little less motorcycle, more in scooters. And looking at our success of some of the new launches and the plans next year, we do plan to outgrow industry both in motorcycles as well as scooters. ... I would not like to give out information ahead of our launches.”

    Management confirmed high single-digit industry growth for FY27, with Hero aiming to outgrow, but withheld specific model launch details for competitive reasons.

    asked by Binay Singh, Morgan Stanley

    2 min read6 chapters

    Detailed Narrative

    01

    Record Financial Performance in FY26

    Hero MotoCorp achieved its highest-ever topline and bottom line in FY26, marking its 25th consecutive year as the world's largest 2-wheeler manufacturer. The company reported a full-year revenue of ₹46,830 crores, a 15% YoY increase, with EBITDA reaching ₹6,871 crores (up 17% YoY) and PAT at ₹5,268 crores (up 14% YoY). The strong performance was capped by a robust Q4 FY26, with revenue of ₹12,797 crores (up 29% YoY) and EBITDA of ₹1,856 crores (up 31% YoY).

    02

    Strategic Growth in Focus Segments

    The company demonstrated significant growth in its strategic focus areas during Q4 FY26. Scooter volumes surged by 48% YoY, while EV scooter volumes expanded 2.5x YoY. The global business (wholesale/dispatches) also saw substantial growth of 41% YoY. Furthermore, the premium Harley-Davidson range grew by 26% YoY, with the new X440 T variant contributing an impressive 120% growth in the quarter, indicating successful penetration in higher-margin segments.

    03

    Margin Management Amidst Commodity Headwinds

    Despite commodity headwinds emerging in March, Hero MotoCorp's ICE business EBITDA margin expanded by 100 basis points YoY to 17% in Q4 FY26, driven by pricing actions, LEAP savings, and operating leverage. However, the overall EBITDA margin improved by a more modest 30 basis points to 14.5% in Q4, after accounting for ₹220 crores in EV investments. Management noted that a 2% price hike did not fully cover the high single-digit BOM cost increase, resulting in a 100 bps gross margin drop in Q4.

    04

    Aggressive Capacity Expansion and Investments

    Hero MotoCorp is committing over ₹1,500 crores in capex for FY27 to support future growth. This includes doubling capacity for popular scooter models like Xoom and increasing Destini capacity by 50%. The EV capacity is set to double from last year's levels within a month, with further doubling planned in subsequent quarters. Additionally, over ₹700 crores is being invested in a new global parts center in South India to bolster the parts and accessories business.

    05

    EV Business Development and PLI Support

    The EV business remains in a build-out phase with ongoing R&D investments, though EBITDA losses per unit are showing a quarter-on-quarter decline. The company has secured PLI benefits for 3 products, covering 60% of its EV portfolio, with plans to expand this to almost 90% during FY27. These PLI benefits are expected to contribute 13% of revenue, playing a crucial role in the EV segment's journey towards self-sustainability.

    06

    Strategic Focus on Technology and Market Share

    The company's strategy emphasizes continuous investment in low-emission powertrains (EV, flex fuels), connected vehicles, and digital technology, including leveraging Gen AI for customer conversion. While overall retail market share has seen a slight dip due to business mix, management expects a reversal as growth in EVs, scooters, premium, and exports continues to outpace the market. Dealer inventory levels are healthy, at around 5 weeks overall and single-digit days for EV scooters.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.