Hero MotoCorp Q1 net up 33% at Rs 750 cr

This is the second best quarterly profit in the company's history even as the net sales declined 2%

Softening input costs and lower depreciation expenses helped Hero MotoCorp report its second-best quarterly profit for the three-month period ended June.

The country’s largest two-wheeler player reported a 33 per cent surge in net profit to Rs 750 crore for the quarter against Rs 563 crore in the corresponding quarter last year. Net sales declined two per cent to Rs 6,856 crore. The net profit is higher than the Bloomberg consensus estimate of Rs 679 crore, even as the revenue is down from the estimate of Rs 7,068 crore.

The results came after the closure of trading on stock markets. The company’s stock closed the day on the BSE at Rs 2,697.85, up 0.87 per cent from the previous close. During the quarter, the company sold 1.645 million units of two-wheelers, down four per cent from the same quarter of last year. While it remained a market leader in motorcycles, Hero lost its position as the second-largest scooter maker to Chennai-headquartered TVS Motor during the quarter.

Saurabh Jain, assistant vice-president (fundamental research), at SMC Global Securities, said growing volumes on a larger base will be a challenge for companies such as Hero MotoCorp. In July, the first month of the second quarter, the company sold 487,580 units, eight per cent lower compared to the corresponding month last year.

The operation profit during the quarter jumped 44 per cent to Rs 945 crore. Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin rose to 15.07 per cent against 13.46 per cent a year ago. The cost of raw materials during the quarter softened four per cent to Rs 4,869 crore. Raw material costs had increased 8.6 per cent in FY15.

Depreciation and amortisation expenses came down sharply to Rs 103 crore against Rs 291 crore in the same period last year. The operating income also increased sharply from Rs 37 crore in Q1 of last year to Rs 99 crore. The employee benefit expense was up over 17 per cent to Rs 314 crore in the quarter.

"During the April-June quarter, we continued to strengthen our market leadership through a combination of product launches and strategic marketing initiatives. We expect the sector to move in an upward trend, though a lot will depend on factors like a good monsoon, rural income and market sentiments”, said Pawan Munjal, chairman, chief executive, and managing director.