Mumbai: India’s biggest motorcycle maker, Hero Honda Motors Ltd, reported a better than estimated 9.1% gain in third quarter profit after it raised prices and sold more expensive models.
Net income rose to Rs300 crore, or Rs15.04 a share, in the three months ended December, from Rs275 crore, or Rs13.77 a share, a year earlier, the New Delhi-based company said.
That topped the Rs286 crore median estimate in a Bloomberg survey of seven analysts. Sales grew 4.7% to Rs2,870 crore.
Hero Honda introduced seven new models in the last quarter to attract buyers as banks curbed loans in India, where most two-wheelers are bought on credit. The company may be able to maintain the growth as the Reserve Bank of India reversed four years of monetary tightening in the past three months and the government announced an economic stimulus to revive growth.
“They will be able to sustain their performance as raw material prices are easing and availability of credit is improving,” said S. Ramnath, an analyst at IDFC-SSKI Securities Ltd. “Despite the lull market, they have done well and this is much better than expected.”
Hero Honda raised motorcycle prices in August for the second time last year to offset higher costs of steel, aluminium and other raw materials.
“Softening of commodity prices, cost rationalization across the board, strengthening of the premium product portfolio and a growing rural market have played a key role n the company’s performance,” the company said in the statement.
Raw material costs, the company’s biggest expense, rose 6% to Rs1,950 crore in the last quarter, compared with an 18% increase in the year-ago quarter.
Earnings before interest, tax, depreciation and amortization expressed as a percentage of sales, or Ebitda margin, widened to 14.47% in the third quarter. The ratio was 13.58% in the second quarter, the statement said.
Hero Honda, 26% owned by Japan’s Honda Motor Co., fell 0.19% to Rs836 on the Bombay Stock Exchange on Tuesday. The earnings were detailed after the market was closed for trading.
Hero Honda’s sales of motorcycles and scooters, including Splendor, Karizma and CBZ X-Treme models, fell to 857,806 from 893,581 a year earlier, it said in the release.
The company accounts for at least half of all motorcycles sold in the country.
Hero Honda opened a new factory in Haridwar, Uttarakhand, in April where it benefits from excise and income tax rebates. That helped cut down excise tax payment in the quarter by 40% to Rs278 crore, the statement said. Revenue from businesses other than manufacturing, such as returns from financial investments, gained 3% to Rs435.9 million.