Shares of Hero MotoCrop gained over 3 percent in the early trade on Friday after its December quarter earnings beat street estimates. The shares touched an intraday high of Rs 2,494.80 after adding 3.43 percent against the previous close on the BSE.

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At 9:50 am, the shares were trading percent 2.07 higher at Rs 2,461.85 per share on the BSE.

The largest two-wheeler maker reported a 14.5 percent rise in net profit for the third quarter of fiscal 2020 at Rs 880 crore from Rs 769 crore in the same quarter previous fiscal. CNBC-TV18 poll had estimated a net profit of Rs 683 crore.

Total sales volume in Q3FY20 declined 14.34 percent to 15,40,876 units from 17,98,905 units in Q3FY19.

Total revenue from operations in Q3FY20 fell 11 percent to Rs 6,997 crore from Rs 7,865 crore in Q3FY19. However, revenue beat CNBC-TV18 poll estimates of Rs 6,896 crore.

EBITDA during the quarter fell 6 percent to Rs 1,039 crore from Rs 1,105 crore, YoY, while EBITDA margin expanded by 80 bps to 14.8 percent, YoY.

Cost reduction efforts and lower raw material cost led to margin beat, Axis Capital said in a report.

However, Axis Capital expects that Hero Moto’s margins may not sustain at current levels given weak industry outlook.

The brokerage maintained ‘reduce’ rating and raised the target price of the stock to Rs 2,530 versus Rs 2,450 per share earlier.

Hero MotoCorp announced an interim dividend of Rs 65 per share.

"The two-wheeler industry continues to face challenges amidst an overall economic slowdown. Early indicators, such as a positive Rabi crop, augur well for the rural economy, which in turn is likely to help the industry,” said Niranjan Gupta, Chief Financial Officer (CFO), Hero MotoCorp.

However, Gupta added that it will take some time for the two-wheeler industry to see a sustained recovery and expects to see a positive turnaround in the second half of the new fiscal (FY21).

During the third quarter of FY20, Hero MotoCorp launched India's first BS-VI motorcycle, the Splendor iSmart and then followed it with the first BS-VI motorcycle in the entry segment- the HF-Deluxe.

“The company is geared-up to transition its entire product range to the new emission norms well before the regulatory deadline and plans to stop all BS IV production by mid- February,” the company said in a regulatory filing.

As the industry moves to BS-VI, global brokerage Morgan Stanley expects a price hike of almost Rs 6,000 per two-wheeler.

Morgan Stanley remained 'underweight' on the stock with a target at Rs 2,143 per share.

The brokerage expects that the company may have to absorb BS-VI costs, given its customers are highly price-sensitive.