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HMCL posted strong volume-led performance in Q4FY26, led by healthy domestic demand. Revenue was up ~29% YoY to Rs128bn, driven by ~24% YoY volume growth, while ASP rose 2.7% QoQ. EBITDA was up ~31% YoY to Rs18.6bn. However, EBITDAM at 14.5% fell by 30bps QoQ, led by ~110bps gross margin (GM) contraction, partly offset by ~40bps/50bps QoQ drop in staff/other opex. The management remains constructive on FY27 demand outlook, despite macro uncertainties, guiding for a high-single digit 2W industry growth, with scooters likely to lead the charge, mainly via urbanization. RM inflation (high-single digits) trends remain broad-based across aluminium, steel, rubber, and plastics. To mitigate this, HMCL took a ~2% price hike in Apr26 and remains open for further calibrated hikes ahead. The management reiterated its medium-term EBITDAM guidance of ~14–16%, led by BOM reduction programs, though transitory RM pressures would be felt in the near term. Structurally, we continue to prefer Ather (refer to: Yet another mega shift in motion; Ather the frontrunner and Favor E-2Ws over E-PVs; Ather nearing an inflection point) and TVSL. Factoring in ~2%/3% volume uptick and ~150/120bps margin dip in FY27E/28E, we cut FY27E/28E EPS by ~6%/4%, leading to a ~5% cut in TP to Rs6,000 (from Rs6,300), basis Mar-28E PER. We retain ADD, as the core portfolio (commuter motorcycles) faces structural growth issues and EV risk; however, valuations at 18x 1YF PER (near its LTA) and FY28E dividend yield of ~4.1% provide comfort.

Stable in-line operating performance; gross margin takes a hit

Revenue rose ~29% YoY to Rs128bn (Emkay est: Rs126bn) amid 2.7% QoQ higher ASP (2% above our estimate) and volume growth of 24% YoY at 17.1mn units. EBITDA came in at Rs18.5bn, largely in line with our estimate (Rs18.7bn). EBITDAM at 14.5% fell by 30bps QoQ, led by 110bps GM contraction, partly offset by 40bps/50bps QoQ drop in staff costs and other expenses. APAT grew ~30% YoY to Rs14bn (Emkay est: Rs14.2bn).

Earnings call KTAs

1) HMCL expects high-single digit growth for the 2W industry in FY27, with scooter volumes likely to grow faster than for motorcycles, led by urbanization trends. It expects H1FY27 to benefit from a favorable base and H2 to see moderation owing to a higher base. Apr/May-26 volume momentum has largely sustained despite macro uncertainties. 2) HMCL has committed ~Rs15bn in capex for FY27, focused on capacity expansion in scooters (2x for Xoom, 50% increase for Destini), EVs (targeting capacity expansion from 15k to 25k units in Q1FY27 and further to >50k units by FY27). 3) EV business remains in an investment phase, but EBITDA losses per unit are declining each quarter. PLI scheme now covers 3 products (~60% of EV portfolio), with plans to extend to ~90% in FY27, translating to ~13% of revenue as benefit. 4) Inflation is broad-based across aluminium, steel, rubber, and plastics. To mitigate this, HMCL took a ~2% price hike in Apr-26 (~Rs700–3,500 across models) and remains open to further hikes. 5) It reiterated medium-term EBITDAM guidance of ~14–16%, led by BOM reduction programs and deferral of discretionary spends. 6) Nine product launches in FY26 helped HMCL fill its whitespaces. FY27 will see further launches across Vida (EV), premium motorcycles, and scooters, quarter after quarter. 7) Export revenue stood at Rs35bn in FY26, with growth driven by LATAM, Africa, deeper penetration in Bangladesh, and scaling in Sri Lanka. 8) Dealer inventory stood at 5 weeks, with e-scooter inventory in single days for industry.

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