Hero MotoCorp posts highest-ever profit in September quarter

Normal monsoon, demand in run-up to festive season lift motorcycle sales at Hero MotoCorp, but Honda is catching up fast

Hero MotoCorp’s Q2 results show profit rose 27.74% to Rs1,004.22 crore from Rs786 crore last year. Photo: Bloomberg
Hero MotoCorp’s Q2 results show profit rose 27.74% to Rs1,004.22 crore from Rs786 crore last year. Photo: Bloomberg

New Delhi: Hero MotoCorp Ltd on Wednesday posted a record net profit for the quarter ended 30 September, as a normal monsoon rains boosted consumer sentiment and demand in the run-up to the festive season lifted motorcycle sales at India’s largest two-wheeler maker.

Net profit increased 27.74% to Rs1,004.22 crore in the quarter from Rs786.12 crore in the year-ago period. Net sales rose to Rs.8,448.74 crore from Rs7,346.47 crore.

Unit sales rose to 1.82 million during the quarter from 1.57 million a year-ago.

Higher demand in the run-up to the festive period bolstered sales at the company, whose earnings before interest, tax, depreciation and amortisation (Ebitda)—an indicator of operating profitability—widened to a record 16.20 %, from 14.91% a year ago, helped by soft commodity prices and cost controls. The Q2 results were declared after market hours on Wednesday.

Pawan Munjal, chairman, managing director and chief executive officer, Hero MotoCorp, said that the September quarter numbers are “a defining phase in the journey” of the company.

“The highest-ever volume sales during the quarter are a reiteration of the overwhelming customer preference for our products, and a testimony to our market leadership,” said Munjal.

He added that the domestic market had seen a revival in the past two quarters due to normal monsoon rainfall and positive consumer sentiment. “The trend is expected to continue through the year and likely to result in double-digit growth for the industry,” Munjal said.

But there’s one concern for Hero MotoCorp—the pace at which rival Honda Motorcycle and Scooter India Pvt. Ltd (HMSI) is closing the gap with the market leader. Between April and September this fiscal, Hero sold 809,638 units more than Honda. In the same period in 2011-12, after the Delhi-based firm ended a 26-year joint venture with Honda, the gap was 1.8 million units.

According to Nitesh Sharma, CFA (Institutional Equity Research, auto and auto ancillary), at Mumbai-based PhillipCapital Pvt. Ltd, Hero’s numbers are “stellar”.

“We have been buyer of the stock led by our thesis of rural recovery owing to the normal monsoon. However, given the recent rally stock performance might depend on sustenance of strong margins and how retail demand shapes up,” said Sharma.

On Wednesday, shares of Hero MotoCorp Ltd rose 1.92% to end the day at Rs3,421.55 as the BSE’s benchmark Sensex fell 0.91% to 27,836.51 points.

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