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Stock to SELL: Shares of Hero MotoCorp came under pressure on Thursday after global brokerage Jefferies downgraded the stock to ‘Underperform’ from ‘Hold’ and cut its target price to Rs 4,950 from Rs 5,550. The revised target implies a downside of nearly 15 per cent from current levels.

Following the downgrade, Hero MotoCorp shares fell as much as 5.2 per cent to an intraday low of Rs 5,513 on the National Stock Exchange. At around 3 pm, the stock had recovered but was still trading lower by 1 per cent at Rs 5,761.

Jefferies said the recent demand support from GST cuts has faded during November–December, leading to weaker momentum. The brokerage warned that the festive-season recovery has not sustained and demand trends are turning soft again.

Hero MotoCorp’s market share declined in December after a temporary seasonal improvement during the festive months. The brokerage flagged this as a key concern.

Domestic two-wheeler wholesale market share has fallen to around 28 per cent during FY26 (April–November), compared with 36–37 per cent seen during FY17–FY21, marking a 25-year low. While Hero remains strong in entry-level motorcycles, Jefferies noted persistent losses in the 110–125cc motorcycle segment and ICE scooters.

In vehicle registrations, Hero’s market share improved from 27 per cent in April–September to 33 per cent in October–November, in line with normal seasonality. However, it has dropped sharply to just 21 per cent in December month-to-date.

The stock is up nearly 40 per cent year-to-date, largely driven by valuation expansion. Jefferies said that at around 20x FY27E price-to-earnings, the stock looks expensive.

The brokerage prefers Mahindra & Mahindra, TVS Motor, and Eicher Motors over Hero MotoCorp within the auto space. Due to lower volume assumptions, Jefferies cut its FY26–FY28 EPS estimates by 2–7 per cent.

Despite the downgrade, Jefferies said it remains constructive on the long-term two-wheeler demand outlook, noting that the industry is still recovering from one of its worst downturns in decades. FY25 wholesales were still about 6 per cent below FY19 levels.

However, near-term market share losses, fading demand tailwinds, and rich valuations could keep the stock under pressure.

Hero MotoCorp shares have fallen nearly 4 per cent over the last five sessions and are down 0.8 per cent over the past month. Still, the stock has gained over 32 per cent in six months and more than 30 per cent over the past year.