Hero Motocorp drops on missing street expectations

Shares of Hero Motocorp are trading lower by nearly 1.5% to Rs 2,775 on the BSE as the auto major posted lower than expected quarterly results. The earnings were lower owing to marketing expenses at home and overseas, and investments in capacity expansion.

It 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 and 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. 

The stock opened at Rs 2,780, touched a high of Rs 2,808 on the BSE. A total of 37,784 shares changed hands on the BSE so far.