Hero MotoCorp Q1 profit rises 3.5% on best ever quarterly sales
New Delhi: Hero MotoCorp Ltd, India’s largest two-wheeler maker, said net profit grew 3.5% in the first quarter to Rs914 crore, helped by its best ever unit sales performance.
The company sold 1.85 million two-wheelers during the quarter as compared to 1.74 million units sold in the first quarter a year earlier, it said in a statement. The New Delhi-based company’s profit marginally exceeded estimates of a Bloomberg poll of 17 brokers who expected net profit of Rs909 crore.
Revenue from operations rose 7.5% to Rs8,612.91 crore from Rs8,010.66 crore in the year earlier. Earnings before interest, tax, depreciation and amortization (Ebitda) margin for the June quarter declined marginally to 16.3%, from 16.63% in the year-ago quarter.
Pawan Munjal, chairman and managing director of Hero MotoCorp, said the company has consolidated its domestic motorcycle market share by clocking all-time high sales.
“The growth in the domestic market was aided by an improvement in overall market sentiment and robust demand for our range of two-wheelers,” Munjal said in a statement. “We remain committed to consolidating our domestic leadership and expanding our global footprint into new markets.”
Hero’s results were in line with the expectations of Bharat Gianani, an analyst at Sharekhan Securities. “Healthy high single digit growth in the topline was offset by a marginal dip in the operating margins on account of increase in the raw material prices and higher discounts on account of GST transition,” Gianani said in a note to clients.
“Going ahead, recovery in the rural sentiments, slew of product launches coupled with increased presence in new export markets should drive Hero’s volumes and earnings growth” he said, adding that his firm retains its “Buy” rating on the stock which remains its preferred pick in the automotive space.
The prediction of better-than-average monsoon rainfall has fanned hopes of faster growth. Good rainfall is expected to boost farm output and improve demand for everything from motorcycles to smartphones and tractors.
Hero’s stock rose 0.43% to Rs3,706.85 on BSE, while the exchange’s benchmark Sensex closed 0.05% lower at 32,228.27 points.
While Hero’s global footprint is still very small with exports of 180,000 units in the year ended 31 March, as compared with Bajaj Auto Ltd’s export of 1.2 million units, the area of concern seems to be the domestic business where its former partner Honda Motorcycle & Scooters India, is quickly bridging the gap with the market leader.
During the April-June quarter, Hero sold 1.8 million units, up 6.15%, in the domestic market, staying marginally ahead of Honda, which grew at 19.4% during the quarter to sell 1.5 million units.
To be sure, Honda’s sales are driven by its scooters (about 6%) and a majority of the Honda scooters sold are Activas. But, Hero dominates the motorcycle market, which has slowed down significantly largely due to tepid growth in the rural economy over the past few years.