Hero Motors shares up 20%- what's driving the stock? Explained with target, stop-loss

Hero Motors shares put in another strong show on Friday, September 25, extending the recovery that followed a lacklustre stock market debut earlier this week. In today's trading, the stock went as high as 20%, adding to its gains beyond the ₹84 IPO price level to 69%. 

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

On Friday, the stock opened at ₹130, marking a 10% premium from its previous close of ₹118.21 and reached an intraday high of ₹141.85, which was 20%.  

This was the third straight session of gains for Hero Motors. The stock had risen 20% in the previous session and more than 17% on its listing day. 

The run-up follows a soft debut on Wednesday, September 23, when Hero Motors listed at ₹82 on the NSE, a 2.38% discount to the issue price. On the BSE, the shares opened at ₹82.10, a 2.26% discount. 

The sharp post-listing bounce has put the stock back on investors' radar, with the question now being whether the gains can hold. Though the firm is involved in areas that promise growth like automotive technology and powertrains, its valuation, profitability ratios, and customer concentration still need to be considered before making a new investment. 

What the market is watching 

Master Capital Services, in a note by its Chief Research Officer Ravi Singh, points to Hero Motors' positioning as an automotive technology player supplying engineered powertrain solutions to global original equipment manufacturers (OEMs) across the US, Europe, India and ASEAN. The two-wheeler sector in India is estimated to achieve a 6-7% CAGR to reach 29-31 million units by FY31, whereas the gears & transmissions market is estimated to witness growth at a CAGR of 6-8% from CY25 to CY31. In the view of the brokerage firm, the underwhelming listing may affect sentiments in the short term, and new buyers would rather wait before making an investment in the shares. In the long term, the prospects depend on the continued growth of the company along with increased profitability. 

Swastika Investmart, through its Head of Wealth Shivani Nyati, also underlines the company's powertrain presence and the opportunities from EV growth, while flagging a premium valuation and high customer concentration. At around 69-74x P/E, the stock trades well above the peer average of 50.2x. 

Hero Motors' Return on Net Worth (RoNW) has improved to 8.53%, and its EBITDA margin is around 10.2%. Both figures, however, trail key peers. Swastika Investmart holds a Neutral post-listing view: fresh investors could wait for a better valuation or price consolidation, while existing holders may consider staying invested with a stop-loss at around ₹75-77. 

On the technical side, Kantilal Chhaganlal Securities, via Mahesh M. Ojha, Vice President – Research & Business Development, sees Hero Motors in a bullish trend with a positive setup, backed by strong volumes over the last three trading sessions. The brokerage has set a target of ₹160-168 for the stock, with ₹118 as the stop-loss. 

Hero Motors IPO details 

Subscriptions for Hero Motors Initial Public Offer (IPO) amounting to ₹1,000 crores were made 6.66 times during the span of three days of bidding process. This includes fresh issue up to ₹600 crore and OFS up to ₹400 crore.  
For the money raised from the fresh issue, ₹190 crores will be used to repay or prepay some borrowings, while ₹200 crores will be spent on purchasing machinery to increase the capacity at its factory at Gautam Buddha Nagar, Uttar Pradesh. 

The remainder will go towards inorganic growth, including acquisitions yet to be identified, other strategic initiatives and general corporate purposes.