Hero MotoCorp net profit rises 37% to Rs 795 crore

Hero's margins during the quarter increased to 15.63% as against 12.02% reported in the same period a year ago

Hero MotoCorp, the country's largest manufacturer of two-wheelers, posted a 37 per cent increase in standalone net profit at Rs 795 crore for the quarter ended December, on the back of improved realisations.

The Delhi-based company had reported Rs 582 crore standalone profit for the same period a year before. It saw a rise of only 2.5 per cent in volume, with subdued rural market conditions.

Bloomberg had estimated the standalone net profit at Rs 781 crore, derived from an analyst poll. Sales volume was 1.69 million units, from 1.64 mn in the same quarter last year. Nearly half of Hero’s volumes are from the rural market.
 

Pawan Munjal, chairman, managing director and chief executive, stated: “The domestic two-wheeler market continues to be sluggish. We expect sentiments to remain subdued for the next couple of quarters. Demand in rural markets has been severely impacted due to consecutive sub-normal monsoons. We might see a positive turn-around towards the second half of the next fiscal if we have a good monsoon and sentiments change in the rural market.”

The fall in rural markets, where a majority of entry-level motorcycles with 100cc engines like the Splendor are sold, was partially negated by rising demand for Hero’s scooter range, concentrated in urban areas. It launched the Duet and Maestro Edge scooters, developed in-house and estimated to carry better margins than its bread-and-butter economy motorcycles. With the success of this range, Hero’s scooter market share has increased to over 20 per cent.

The company's profit margin rose to 15.6 per cent from 12 per cent in the same period a year before. "Net profit was in line with our estimates, with higher margins led by a three per cent improvement in realisations. The reported margins were ahead of our estimate of 15 per cent," said Mihir Jhaveri, director at Religare Capital Markets.

Net sales grew to Rs 7,174 crore, up six per cent from Rs 6,792 crore in the same quarter last year. There was a substantial rise in other operating income to Rs 120 crore, as compared to Rs 46 crore earlier. Benign raw material costs and better control measures helped in margin improvement.