Hero MotoCorp Q3 net rises 11% to Rs 583 cr, misses Street estimates

Net sales were also lower than Street estimates with a 1% drop at Rs 6,792 cr

Hero MotoCorp, India’s largest two-wheeler maker by volumes, announced an 11 per cent year-on-year (y-o-y) increase in net profit to Rs 583 crore for the quarter ended December — sharply missing Street estimates. While analysts had estimated a profit of about Rs 680 crore, the earnings were lower due to marketing expenses at home and overseas, and investments in capacity expansion, the company said. A Bloomberg survey had indicated a 35 per cent jump in Hero's third-quarter profit to Rs 710 crore.

Net sales were also lower than Street estimates with a one per cent y-o-y drop to Rs 6,792.5 crore for the quarter. While earnings before interest, taxes, depreciation and amortisation (Ebitda) margins for the quarter fell one percentage point to 12.02 per cent - versus 13.06 per cent in the year-ago quarter, tax expenses were up 28 per cent in the period to Rs 246.24 crore. Unit volumes in the quarter fell two per cent to 16,48,548 units.

Pawan Munjal, vice-chairman, CEO, and managing director at Hero MotoCorp, said: “We continue to make investments as we pass through a phase of global expansion, capacity enhancement and brand building and these added expenses have impacted our margins in the third quarter.”  

In the quarter, Hero made several investments for brand-building such as a tie-up with golf legend Tiger Woods as a corporate partner, and launch of the brand Hero in Colombia. Hero was also the title sponsor for Indian Super League football tournament. Meanwhile, employee costs in the quarter also rose 30 per cent to Rs 316 crore with the new and fourth Hero plant at Neemrana starting operations.

“Going forward, we remain cautiously optimistic about the business climate. With crude prices hovering below the $50-mark, and commodity prices continuing to remain soft, a lot will also depend on the much-awaited Budget to be presented by the Central government later this month,” said Munjal.

He added that although market sentiments have improved after the new National Democratic Alliance government took charge at the Centre, other factors such as interest rates, retail inflation and the likely changes in global economy will play a role in determining the industry growth in the coming quarters.

The Hero MotoCorp scrip closed at Rs 2,812.35 at the BSE on Tuesday, down 0.78 per cent from the previous close.

The results came after market hours.