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Strong Quarter with Focus Cost Savings

HMCL reported strong Q1FY27 standalone numbers, beating estimates on all fronts. Revenue was driven by better mix (+8%) and pricing, while cost savings and operating leverage helped partially mitigate some of the commodity headwinds. Its near-term focus shifts to volume and absolute EBITDA growth while retaining mid-term margin guidance of 14-16%. It continues to grow market share in scooters (both ICE & EVs), premium range, global markets, and allied business with focus on cost savings. We estimate volume/realization CAGR of 6.6%/5.2% over FY26-28E translating to revenue/EBITDA/APAT CAGR of 12.2%/12.9%/13.5%. Retain ‘Accumulate’ rating with TP of INR6,000 (previous INR5,600). We value the core business at 16x P/E FY28E and its stake in Hero Fincorp at INR55 and Ather Energy at INR429

Standalone revenue grows 35.7% YoY to INR130.0bn:

It beat BBGe/PLe by +4.6%/+4.3% as realization was INR77.5k (+10.6% YoY, +3.8% QoQ). Gross margin stood at 28.5% (- 475bps YoY, -300bps QoQ), while EBITDA margin was 13.3% (-115bps YoY, -120bps QoQ) +20bps above BBGe and PLe. EBITDA stood at INR17.3bn (+25.0% YoY, -7.0% QoQ), while APAT stood at INR14.5bn (+29.2% YoY, +3.8% QoQ) beat BBGe/PLe by +15.4%/+15.9% driven by better-than-expected other income.

Stable EV market share at 10.9% (+400bps YoY):

VIDA, HMCL’s e2W, is seeing unit economics improving, with Q1 investment of INR2.3bn (flat QoQ). It had market share of 20%+ in 53 towns and was amongst top 2 in 62 towns. PLI of INR0.48bn was accrued in Q1, covering 60% of its portfolio, which it expects to go to 100% by Dec’26. This along with improving scale, BOM cost reduction, LEAP savings, unique value proposition and calibrated price increases should improve margin trajectory for FY27 as some EV models now recorded positive gross margin. EV revenue stood at INR6.6bn, (~5% of revenue). ICE EBITDA margin was 15.9% (-90bps QoQ) cushioned by strong operating leverage, cost savings, and higher profitability in parts business

Strong demand led capacity expansion undertaken for motorcycles and scooters:

The company has added ~2k units/day for Splendor and ~2.5k units/day in scooters, including a doubling of Destini capacity, while Xoom capacity expansion is underway. EV capacity is being scaled up by 3x over FY26 to ~45k units/month by FY27- end (as of Aug’26 it stands at ~30k units/month and 2nd expansion phase will be in Q4FY27), and ICE scooter capacity has already been increased by ~1.5k units/day. Scooter production is currently running at ~65k units/month, with further additions expected to more than double output over time. To support global demand, HMCL has invested INR7.5bn in a second global parts center at Tirupati, which will more than double partshandling capacity by end of 2027. The company will also leverage its Neemrana plant to accelerate growth in the premium segment.

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