Robust sales, cost control boost Hero profits

A near 20% boost in absolute sales, higher other income etc helped the company in improving profits

A robust growth in sales saw the net profit of Hero MotoCorp, India’s biggest two-wheeler manufacturer, exceed Street expectations in the quarter ended September 30.

The Delhi-based company, controlled by the Munjal family, posted 59 per cent growth in net profit during the quarter at Rs 763 crore against Rs 481 crore posted in the same quarter last year.

A near-20 per cent growth in sales, higher other income, discontinuation of royalty payments to Honda and better cost control during the quarter helped the company in improving profits. Festive demand of Navratri and Ganesh Chaturthi overshadowed the subdued sales during the Pitrupaksh days of September.

A Bloomberg consensus estimated the profit to be at Rs 694 crore. Its unit sales grew to 1.6 million units during the reporting quarter as compared to 1.41 million units sold in the same period last year. Analysts said new launches and pick up in rural demand helped sales.

Pawan Munjal, vice-chairman, chief executive and managing director, Hero MotoCorp, said, “We are laying the roadmap for the future at Hero with a strong focus on technology and innovation. The entire team is confident that we can further build on our leadership once we roll out our global range of new motorcycles and scooters. At the same time, a concerted focus on costs has enabled us to have good margins even as we continue to keep strengthening our market leadership.”

Net sales of the company grew to Rs 6,863 crore during the quarter, an increase of 20 per cent, compared to Rs 5,696 crore reported in the corresponding quarter a year earlier. EBIDTA (Earnings Before Interest, Depreciation and Amortization) margin stood at 13.52 per cent.

During the quarter, Hero launched operations in Columbia through a wholly-owned subsidiary. It is building a $70-million facility having a total capacity of 1,50,000 units and expected to be operational in mid 2015 in Columbia.