Shares of leading two-wheeler manufacturer Hero MotoCorp Ltd. were under pressure on Tuesday after brokerage firm Kotak Securities issued a cautious outlook on the company.

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Kotak Securities maintained its ‘reduce’ rating on the stock, saying that there was no respite for the company from the recent challenges it has been facing. The brokerage also cut its price target on Hero to Rs 2,400 from Rs 2,600 earlier.

Explaining the rationale behind its stance, Kotak Securities said that continued increase in the cost of ownership of vehicles, higher inflation, weak rural demand and concerns around El Nino are the key overhangs on the two-wheeler maker.

The El Nino phenomenon impacts the weather, thereby adversely affecting the rural economy that is primarily dependent on agriculture. This, in turn, reflects on two-wheeler sales.

Kotak Securities further added that the entry of Honda Motorcycle and Scooter India into the entry-level motorcycle segment is also a major negative for Hero MotoCorp.

Honda introduced its most affordable motorcycle, Shine 100, in India on March 15 at a price of Rs 64,900, ex-showroom, Mumbai. It is expected to take on entry-level commuter motorcycles like the Hero Splendor.

“Honda recently launched a 100cc bike at an aggressive pricing that may lead to further market share loss for Hero Moto,” said Kotak Securities.

Notably, Hero MotoCorp’s market share in the domestic motorcycle segment has declined to 45.8 percent in the first nine months of the current financial year from 53 percent in financial year 2016, said Kotak Securities. It added that the market share has seen a consistent decline in South India, Maharashtra and Bihar.

Hero MotoCorp announced last week that it would make an upward revision in the ex-showroom prices of its select motorcycles and scooters, effective April 1, 2023.

The company said that the price revision would be around 2 percent and the exact quantum of increase would vary by specific models and markets.

Shares of Hero MotoCorp are trading 1.9 percent lower at Rs 2,264 and is among the top losers on the Nifty 50 index. The stock has declined 17 percent so far this year.

(Edited by : Rukmani Krishna)