Hero MotoCorp shares drop over 3%, emerges among top losers in NIFTY Midcap 100 index; here is why

Shares of the country's largest two-wheeler maker Hero MotoCorp fell as much as 3.25% to hit an intraday low of ₹5,966 on the National Stock Exchange after global investment bank UBS flagged weak volume growth due to a weak economic environment. On the BSE, Hero MotoCorp shares dropped as much as 3.23% to hit an intraday low of ₹5,964.

The stock was among the top losers in the NIFTY Midcap 100 index.

UBS in a report said that the key downside risks are weak volume growth due to a weak economic environment and cost pressure due to sharp raw material price increases.

"Another downside risk is a potential price war with Honda and Bajaj Auto in the two-wheeler market and a market share loss. The key upside risk is a faster economic recovery leading to high industry volume growth and improved profitability. Other upside risks are successful new launches in the scooter and premium segments that lead to material market share gains," UBS said in its report.

As per the UBS report Hero MotoCorp's market shares in early December declined 19% compared with its market share of 35% in the last week of November which came on the back of accelerated Vahan onboarding due to dealer incentive structure.

UBS added that Hero MotoCorp's market share for the last 14 days stands at 29% as against 35% for the first three weeks of November.

Hero MotoCorp earlier this month reported a 31% year-on-year increase in total sales at 6,04,490 in November.

The two-wheeler maker sold 4,59,805 units in the same month last year.

Domestic sales stood at 5,70,520 units last month as compared with 4,39,777 units in the year-ago period, Hero MotoCorp said in a regulatory filing.

"The overall retail performance remained strong, supported by increased consumer interest, higher dealership footfalls, targeted marketing initiatives resulting in a significant rise in demand across both its premium and commuter motorcycles and scooters," Hero MotoCorp said in a regulatory filing last week.

VIDA, its electric two wheeler unit, reported robust growth trajectory with 12,199 VAHAN registrations, reflecting a 66% increase compared to the same period last year. VIDA strengthened its position as one of the fastest-growing EV players in the country, capturing a 10.4% market share.

As of 11:34 am, Hero MotoCorp shares traded 2.94% lower at ₹5,985, underperforming the NIFTY Midcap 100 index which was up 0.17%.