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HMCL reported a healthy 1Q, with revenue up 36% yoy, led by a 23% yoy/4% qoq volume/ASP growth (ASP 4% ahead of estimate). EBITDA rose 25% yoy, while EBITDAM fell by 120bps qoq amid 300bps qoq gross margin decline (~4.5% commodity impact), partially offset by 180bps qoq curtailment in other expenses. HMCL guides for double-digit growth for the domestic 2W industry in FY27, with growth in 2H as well (despite a high base). For HMCL, growth is expected to be led by sustained demand across segments (aided by product interventions, particularly in EVs and premium motorcycles) and capacity expansion (EVs – 3x; Destini – 2x; Xoom by 50%; Splendor by 2k/day, etc), and supported by lean channel inventory (Vida: 2-3 days; Xoom/Destini – half of normal; Splendor – low vs normalized 6 weeks). HMCL has taken 4.5% blended price hikes in ICE-2Ws and ‘early doubledigit’ hikes in EVs since Feb-26-end (marginal hikes seen in ICE/EVs in Jul-26). It aims to offset a marginal uptick in input cost expected in 2Q via improved product mix, optimized discretionary spends, and accelerated cost-savings. We raise FY27E/28E EPS by 6% to factor in better ASPs. Our TP increases by ~12% to Rs6,700 (from Rs6,000; rolled forward) at 18x Jun-28E core PER. We retain ADD, as the core portfolio (commuter motorcycles) faces structural growth issues (segment share at 32% in 1QFY27; FY25/FY24: 38%/41%) and EV risks. However, valuations at 18x FY28E PER and dividend yield (FY28E: 4%) provide comfort.

Overall strong 1Q; beat across parameters

Revenue rose ~36% yoy to Rs130bn, led by 3.8% qoq higher ASP and volume growth of 23% yoy to 1.68mn units. EBITDA came in at Rs17.3bn. EBITDAM at 13.3% fell by 122bps qoq, largely due to ~300bps gross margin contraction, which was partly offset by 180bps qoq drop in other expenses. APAT grew ~29% yoy to Rs14.5bn (Emkay estimate: Rs12.6bn).

Earnings call KTAs

1) The management anticipates the 2W industry to approach double-digit growth in FY27, with positive growth in 2H despite a higher base from last year. Demand momentum seen in 1Q is expected to continue in 2Q.

2) HMCL retained medium-term EBITDAM target of 14-16%, but acknowledged that it may not be achievable in the short term due to transitory commodity cost pressures. For 2QFY27, a marginal uptick in input cost inflation is expected (1Q saw net commodity impact of 4.5%) to be offset via improved product mix, optimized discretionary spends, and accelerated cost-saving programs.

3) HMCL implemented a blended average price hike of 4.5% for ICE 2Ws and double-digit price hike for EVs since Feb-26.

4) EV channel inventory is low (2-3 days), indicating immediate retail of supplied units. Channel stock for ICE scooters, especially Xoom/Destini, is about half of the normal level. The motorcycle portfolio currently holds lower inventory, with HMCL building toward 6 weeks of channel stock to prepare for festive.

5) It has expanded production capacity for several segments: EV capacity doubled from 15kpm units to 30kpm units as of Aug-26, with plans to reach 45kpm units by FY27-end; Splendor capacity increased by 2k/day (>50kpm); Destini capacity doubled; and Xoom scooter capacity increased by 50%.

6) HMCL is advancing its E-motorcycles with 2 concepts, Project UBEX (urban mobility) and VXZ (high performance), expected to launch starting FY28; it plans significant portfolio expansion in the premium segment over next 12M (refreshes this festive and larger full body change models in upcoming quarters).

7) FY27 capex guidance: Rs15bn

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