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Decent Q2; guides to a robust H2 on strong post-festive offtake

HMCL clocked a decent Q2, with revenue up ~16% YoY to Rs121bn led by 4% higher ASPs/11% YoY volume growth (Q2 market share at 29.1%, up by 19bps YoY/79bps QoQ). EBITDA came in at Rs18.2bn, with EBITDAM at 15% (+60bps QoQ), aided by operating leverage. The mgmt pointed to strong festive trends (>1mn Oct-25 retails; 31.6% share vs 25% share in Q2FY26), the sharp rebound in the 100cc space post GST cut, and traction in VIDA (e-2W share at 11.1%, up by 590bps YoY) aiding market share gains for HMCL in H2 (expects H2 industry growth at ~8-10% vs flattish in H1FY26). During festive (Sep-Oct25), HMCL outpaced the 2W industry’s Vahan retails (55% YoY growth vs 35% industry). While GST-cut led momentum should aid HMCL in the near term, we believe its core portfolio faces high risk from electrification (refer to E-2W thematic Yet another mega shift in motion; Ather – The Frontrunner). We raise FY26E EPS by 5.6% on better H2 outlook given strong festive; FY27/28E EPS inched up 2-4%. We retain ADD, keeping SOTP-based TP unchanged at Rs6,000.

Decent Q2 with slightly better than expected margins

Revenue grew ~16% YoY to Rs121.2bn, slightly above our estimates amid ~4% higher ASPs and volume jump YoY to 16.9mn units (up 11% YoY). EBITDA came in at Rs18.2bn, with EBITDAM up by 60bps QoQ at 15%, led by lower staff costs and other expenses, while gross margin was flattish for Q2. APAT grew ~16% YoY to Rs13.9bn.

Earnings call KTAs

1) HMCL recorded >1mn retails in Oct-25, delivering 31.6% market share while guiding for sustained post-festive demand aided by the marriage season + rural recovery. 2) The mgmt guided for ~8-10% 2W industry growth in H2 (vs earlier guidance of ~6-7% for FY26), and is confident of outpacing this given the strong bounce-back in the 100cc segment (Splendor, HF Deluxe) during festive. The segment (after a lull in H1) is expected to pick up in H2, riding the festive/GST-cut led momentum, coupled with the marriage season kicking in. 3) Retail inventory is now at multi-year lows, and receivables reduced from 30 days historically to ~12 days. 4) The Scooter portfolio (Destiny 125, Xoom 125) delivered consistent market-share gains with strong adoption in Kerala, Karnataka, Gujarat, and Maharashtra. Within scooters, HMCL’s e-scooter (Vida VX 2) has gained consistent market share. 5) VIDA’s growth strategy relies on strong brand building, VX2 product positioning, BAAS/buyback for affordability comfort, cost reduction via BOM + PLI and future launches in the pipeline. 6) EBITDAM for the ICE business has improved to 17.7%, up by 121bps YoY driven by lower RM cost and mix improvement, while overall EBITDAM stood at 15% (indicating a drag of 266bps from e-2Ws in Q2 vs 238bps in Q1). 7) No major discounting push has been seen yet; HMCL’s focus remains on brand + product-led growth supplemented by higher ad spends for festive (up 10% YoY). 8) On ABS regulations, the mgmt mentioned it is in talks with the government for optimal implementation and is confident of managing the cost impact. 9) Commodity cost for Q2 was largely flat; however, Q3 could see some stress on margin owing to aluminum-led inflation (1-2%) 10). EBITDAM guidance is unchanged at ~14-16% (14.8% in H1FY26).

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