Hero Honda Q2 net soars 50 per cent

Hero Honda Motors, India’s biggest motorcycle maker, posted a better-than-estimated 50 per cent rise in net profit after it boosted sales ahead of the country’s festival season and increased prices.

Net profit climbed to Rs 306 crore ($62.4 million) in the three months ended September 30 from Rs 204 crore a year earlier, the New Delhi-based company said in a release today. That topped the Rs 299 crore median estimate in a Bloomberg survey of 11 analysts. Sales rose 36 per cent to Rs 3,190 crore.

Hero Honda’s motorcycle and scooter sales rose 29 per cent in the past three months as dealers stocked up on vehicles ahead of next week’s Diwali festival, traditionally the best sales season for companies. The Indian affiliate of Honda Motor Co unveiled four models this week to lure buyers as tight credit and inflation threaten to slow demand.

“The company has been trying to build up inventory at the dealers so that there is ample stock for the festival season,’’ said Surjit Arora, an analyst at Prabhudas Lilladher in Mumbai, who has an “accumulate’’ rating on the stock.

Indian motorcycle makers boost sales to dealers to reduce waiting times during Diwali, when many Indians consider it auspicious purchase expensive items. The companies only report factory shipments not retail demand.

Industrywide sales growth was inflated last month because Diwali is being celebrated a month earlier than it was last year. That skewed September sales higher as the festival falls on October 28. It was in November last year.

Hero Honda’s sales of the Splendor, Karizma, CBZ X-Treme and other models, rose to 972,095 in the last quarter, it said in the release. The company accounts for more than half of all motorcycles sold in the world’s second-largest market for two-wheeled vehicles.

Hero Honda, 26 per cent owned by Japan’s Honda, gained 3.4 per cent to Rs 834 on the Bombay Stock Exchange today.

The company also raised prices by as much as Rs 1,500 from August 1 to cope with higher steel and aluminum prices, and inflation that rose to a 16-year high.

Raw material costs, the company’s biggest expense, rose 34 per cent to Rs 2,400 crore last quarter. Profit also rose because Hero Honda shifted production to tax-free locations, Arora said.