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Revenue and EBITDA in-line, PAT Misses Expectations:

* Revenue for Q4FY25 was at INR 99,387Mn up 4.4% YoY and down 2.7% QoQ (vs consensus est. at INR 97,566Mn) led by 5.3% YoY growth in ASP and 0.9% YoY de-growth in volumes.

* EBITDA for Q4FY25 was at INR 14,156Mn, up 4.1% YoY and down 4.1% QoQ (vs consensus est. at INR 13,910Mn). EBITDA margin was down 3bps YoY and 22bps QoQ to 14.2% (vs consensus est. at 14.3%).

* PAT for Q4FY25 was at INR 10,809Mn, up 6.4% YoY and down 10.1% QoQ (vs consensus est. at INR 11,244Mn).

Margins Resilient Despite EV Drag; Focus Remains on Scaling Profit Pools Across ICE and Electric:

Hero MotoCorp reported a resilient ICE EBITDA margin of 16.1% in Q4 FY25, with full-year ICE margins expanding 90 bps YoY to 16.2%, supported by favorable product mix, lower commodity costs, and ongoing LEAP cost initiatives. While investments in the EV business (~INR 6300Mn in FY25) weighed on consolidated margins, overall EBITDA still improved 40 bps YoY to 14.4%, reflecting strong operating leverage in the core business. EV EBITDA losses narrowed to -95% (from -155%), with management reiterating its breakeven target at 25,000–30,000 monthly volumes. Localization, BOM optimization, and PLI incentives are expected to drive margin recovery in the EV vertical. Management has guided EBITDA margins in the 14–16% range; however, we expect margins to settle around 15% by FY27, supported by improving EV operating metrics and growth in its E3-W subsidiary, Euler Motors.

Strengthening Premium Portfolio and Export Mix to Drive Structural ASP and Volume Upside:

Hero MotoCorp continues to accelerate its premiumisation journey with sustained traction across the Xtreme, Xpulse, and Xoom platforms. The Xtreme 125R has already contributed over 3 lakh units, taking the broader Xtreme franchise close to 5 lakh units, while the newly launched Xtreme 250R is off to a strong start and is expected to evolve into a core premium brand. In scooters, the Xoom range continues to see strong consumer pull. These launches, coupled with an expanding Hero 2.0 and Premia dealership network, are enabling deeper premium penetration across domestic and international markets. Notably, ~40% of Hero’s exports now come from premium products. We expect these initiatives to support sustained improvement in ASP, drive mix-led volume growth, and structurally enhance profitability over the medium term.

View and Valuation:

We maintain our ‘BUY’ rating on Hero MotoCorp with an unchanged target price of INR 5,100, valuing the stock at an unchanged PE multiple of 17x FY27E EPS. Our EPS estimates for FY26/FY27 are revised marginally by -0.8%/0.0%, reflecting minor adjustments. We remain positive on the company’s outlook, driven by its strategic push in the premium segment and anticipated recovery in rural demand.

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