Hero MotoCorp Q4 profit rises 34.7% to Rs967.4 crore on strong rural demand
Motorcycle sales grew 23.4% to 2 million units in the March quarter from 1.62 million units a year earlier
New Delhi: Hero MotoCorp Ltd, India’s largest two-wheeler maker, said fiscal-fourth quarter profit rose 34.7%, led by a jump in sales of cheaper motorcycles as rural demand revived after two consecutive years of near-normal monsoon.
Net profit rose to Rs967.4 crore for the quarter ended 31 March from Rs717.75 crore in the year earlier, the company said on Wednesday.
A survey of analysts by Bloomberg expected net profit of Rs958.3 crore.
The surge in sales was also because of a low base in the year-earlier quarter because of the lingering effects of the ban on high-value currency.
At least 50% of Hero MotoCorp’s total motorcycle sales come from the rural and semi urban market. Its total motorcycle sales grew 23.4% to 2 million units in the quarter from 1.62 million units a year earlier. Net sales jumped by 23.7% to Rs8,564.04 crore.
Operating margin expanded by 321 basis points to 16% during the period though this is not comparable since the company had to give huge discounts to clear its stock of vehicles with BS-III emission engines after the Supreme Court imposed a ban on sales on 28 March 2017, which hurt operating margin.
The Pawan Munjal-led company though saw a significant jump in overall cost due to a substantial increase in raw material cost and other expenses due to new product launches and Auto Expo expenses.
“The fiscal year 2018 proved to be yet another year of record performances and landmark achievements—be it domestic sales, global expansion or in the field of research & development, manufacturing excellence and technological innovations at Hero MotoCorp and its alliances. We are clearly focused on sustaining our leadership in the market and consistently keep increasing wealth for our investors,” said Pawan Munjal, chairman and managing director, Hero MotoCorp Ltd, in a press statement.
During the fiscal, the company announced its investment in Ather Energy, a start-up which develops electric-two-wheelers. According to Pawan Munjal, the Bengaluru based start-up will soon start selling its electric two wheelers.
For FY18, the Delhi-based company reported a 13.8% increase in total vehicles sold while net sales increased by 13.1% to Rs32,230.49 crore. Net profit of the company during the period increased by 9.48% to Rs3,697.36 crore.
During the financial year the company announced its re-entry into the premium motorcycle segment with the Extreme 200R motorcycle.
“Strong traction in rural areas and low base helped the company to post strong volume growth. Low margin base in Q4FY2017 (due to higher discounting on back of BS-IV emission norm transition and operating leverage due to volume drop) resulted in strong margin improvement,” said Bharat Gianani, research analyst, Sharekhan.
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