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HMCL and HD launch their first co-developed product X440…

* Hero MotoCorp (HMCL) launched its first co-developed product with Harley Davidson (HD) – ‘X440’ – at CIT Jaipur. This marks HMCL’s entry into >400cc category where it had no presence earlier.

* The X440 retains the retro look of Harley Davidson bikes and comes with three variants: Denim, Vivid and S. Ex-showroom price ranges between INR229k and INR269k. It will be produced at HMCL’s Neemrana plant and would be retailed through Harley Davidson’s dealer network across the country.

Features

* HD X440 will be powered by 440CC oil-cooled BS6-II and E20 compliant engine, a first for HMCL. It comes with an assist and slipper clutch that typically helps the bike to remain in control under hard braking conditions. This engine is mated to a 6-speed transmission, which offers the best of both worlds (highway cruising and relaxed city commuting).

* It has a commanding driving position that helps the rider during long rides and its flat-seat profile augments pillion comfort. It is available in dual channel ABS version only with a combination of 18” front and 17” rear wheels.

* The X440 also hosts a 3.5” TFT digital display with all the latest features such as driver alerts, Bluetooth-enabled turn-by-turn navigation, etc.

Competition

* The average industry size of domestic >350CC category was 65.5k units/month as of FY23. This implied ~5% share of the overall domestic 2W industry. Within this, RE commanded ~93% share, followed by HMSI (~4%) and BJAUT (2%).

* HD X440 would rival the likes of RE Classic 350 (sales of 26.2k units per month) and Hunter 350 (sales of 15.9k units per month). While the HD X440 costs 13% more than the RE Classic 350, it also boasts a larger 440CC engine

View on the product

* HD X440’s starting price of INR229k is very aggressive and it looks like a credible product from Harley brand. While we await real world feedback for the product, it ticks all the right boxes on paper to make it successful. This platform will also have a different product under Hero brand later during the year.

* Valuation and view: 2W demand recovery in the domestic market is expected to sustain on a low base, led by healthy recovery in the urban market and gradual recovery in the rural market. HMCL is a pure play on the domestic 2W industry and its core strength lies in the 100cc motorcycle segment. The company has low vulnerability to EVs. Scooters account for just 8% of the company’s volumes. Moreover, 100CC motorcycle, which is the core product of the company, is considered less prone to being disrupted by EVs. We estimate its revenue/EBITDA/PAT to register a CAGR of 10%/16%/17% over FY23-25. Our estimates do not factor in any material ramp-up in scooters and premium motorcycles. The stock currently trades at ~15.5x/14.5x FY24E/FY25E EPS. We reiterate our BUY rating with a TP of INR3,475 (based on 16x Jun’25 + INR231/sh for its stake in NBFC business + INR116/sh for its stake in Ather Energy).

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