Hero Honda plunged to a 52-week low on Tuesday as investors offloaded the stock in favour of Bajaj Auto, with the latter doing well in the motorcycle segment.

The Hero Honda stock was down by nearly 4% at Rs 222.20 on the BSE in mid-afternoon trades, plunging to the day's low of 221.15 earlier in the session, which is also a 52-week low. 208,000 shares changed hands on the counter. The stock has witnessed a sharp setback in the last few sessions. From a recent high of Rs 254.50 on 4 February 2003, the stock has shed 12.6% in the last five sessions to the current Rs 222.20.

Dealers said that investors are churning their portfolio from Hero Honda to Bajaj Auto, triggering a slide on the Hero Honda counter. While Hero Honda's target of selling 18 lakh bikes in the current year looks quite optimistic with just two months left for the end of the current fiscal, on the other hand, Bajaj Auto's Pulsar brand of bikes have been doing well.

The Bajaj Auto scrip was down by 1% to Rs 529 on account of profit-taking, after the scrip witnessed a sustained rise from an early October 2002 low. The scrip had gained 50% from a low of Rs 366.10 on 4 October 2002 to a multi-month high of Rs 550 on 6 February 2003.

The number one motorcycle maker, Hero Honda, has seen erosion in its market share in favour of BAL and TVS Motors. Hero Honda is the number one motorcycle maker, followed by Bajaj Auto. According to data from the Society of Indian Automobile Manufacturers, Hero Honda's market share in motorcycles has steadily fallen to 45% in the April-December 2002 period from 49.6% in the year-ago period. In the same period, BAL's market share rose from 21.7% to 23% and TVS Motor's share improved from 14% to 19%.

Despite tough competition, Hero Honda so far has been able to maintain its profit margins. But in the current quarter, there are fears that its margin may be hit, which led to institutional sell-off on the counter. Analysts said the margin may take a beating following huge expenditure on advertisements and dealer incentives. Hero Honda is the co-sponsor in the Cricket World Cup, which is being held in South Africa. Analysts also said that in the face of cut-throat competition, Hero Honda may not be in a position to hike bike prices.

On the other hand, market players deem BAL scrip as a value buy as the company's medium-term prospects seem enticing. BAL's bike Pulsar continues to dominate the performance and power segment of the motorcycle market. Within a short span of time, Pulsar has achieved sales of around 15,000 units per month. With the Pulsar now going national, a significant increase in sales is expected. Pulsar has already completed the first 1,00,000 sales within a short period of 12 months. An average of 17,000 vehicles have been sold every month in the last quarter and the company expects to sell 25,000 vehicles per month by March 2003.

BAL continues to be a market leader in the entry level and performance segment in respect of bikes, with a greater product and marketing focus being brought in the executive segment - which is represented by the Caliber and Croma. A new 100 cc bike BYK (code named CBM) is slated for a national launch soon. There are expectations that by this month, BAL will launch this new bike, which is placed in the executive segment. The bike is expected to attract a whole new set of young and first-time buyers of two-wheelers. Also, the 125 cc World Bike is being jointly developed with Kawasaki.

BSE Code: 500490