Hero MotoCorp Q4 preview: Analysts see up to 60% YoY rise in Ebitda

HeroMoto Corp, slated to report its March quarter results (Q4FY21) on May 6, is expected to post nearly 60 per cent year-on-year growth in earnings before interest, tax, depreciation, and amortization (Ebitda) aided by healthy sales volume and low base effect. However, price hikes taken due to BS-VI transition and to off-set increase in input costs may not be enough to cushion Ebitda margin hit, say analysts.

At the bourses, though, stock of the two-wheeler maker has underperformed the benchmark Nifty50 and the Nifty Auto index, ACE Equity data show. During three months to March, Hero Moto’s stock declined 6.3 per cent on the NSE relative to a gain of 5 per cent and 7.2 per cent in the benchmark and sectoral indices, respectively.

Here’s what key brokerages expect from Hero Moto’s result:

Nomura

The global brokerage has one of the most conservative estimates for the New Delhi-based firm with standalone net profit seen at Rs 794 crore, up around 28 per cent YoY, during the quarter under review. This compares with PAT of Rs 620.7 crore posted in Q4FY20 and Rs 1,084.5 crore in Q3FY21.

Revenue and Ebitda, meanwhile, could rise 33 per cent YoY each to Rs 8,493.8 crore and Rs 1,102.3 crore, respectively.

“We expect 33 per cent YoY growth in revenues led by 18 per cent growth in overall volumes and price increase due to BS-6 models. Margins are likely to decline 150 bps QoQ on rising commodity costs,” it said in its result expectations report.

Emkay Global

This brokerage forecasts a 61 per cent yearly increase in Ebitda at Rs 1,061.9 crore from Rs 659.9 crore reported in the previous year period. Sequentially, however, it would mean a 25 per cent contraction from Rs 1,413.6 crore reported in Q3FY21.

Revenues, too, it says are likely to decline sequentially to Rs 8,490.1 crore led by a 15 per cent QoQ drop in volumes. Sales were at Rs 9,775.8 crore in the December quarter of FY21 and at Rs 6,238.4 crore in Q4FY20. “Despite benign currency movement (JPY depreciation), Ebitda margin may to 12.5 per cent contract on higher input costs and lower scale,” it added.

At the bottomline, PAT is projected to swell 33 per cent on year to Rs 824 crore but slip 24 per cent on quarter.

Kotak Institutional Equities

At one of the most optimistic estimates, KIE pegs Hero Moto’s PAT at Rs 851.6 crore, up 37 per cent YoY and down just 21 per cent QoQ. Operationally, it expects Ebitda to zoom over 68 per cent to Rs 1,110.5 crore compared with last year led by operating leverage benefits in 4QFY21.

“We expect revenues to increase by 35 per cent YoY in Q4FY21 led by 18 per cent YoY increase in volumes and 17 per cent YoY increase in average selling prices due to BS-VI transition and price increase taken to offset input cost increases,” it noted. Overall, it expects gross margin to decline by 230 bps YoY led by input cost pressures in the quarter under review.

Nirmal Bang

It expects Hero MotoCorp’s net profit to rise by 30 per cent YoY (Rs 804 crore) led by an 18 per cent YoY volume growth and margin expansion (+240bps YoY). That said, given that input cost headwinds are likely to continue in the coming quarters, Ebitda margin in this quarter may decline by 150bps QoQ to 13 per cent.

BOB Capital

The brokerage expects that since ASP has risen around 2 per cent QoQ given recent price hikes, while volumes have fallen 15 per cent, revenue may fall around 13 per cent QoQ. Gross margin is forecast to contract sequentially, weighing on Ebitda margin (–210bps QoQ to 12.4 per cent), it says. Key monitorable for the brokerage would be inventory levels, new launches and any vendor side supply challenge amid second wave of Covid-19.

IIFL Securities

The brokerage pegs sales at 1,568,262 units, down 15 per cent sequentially (from 1,846,941 units) but up 17.5 per cent YoY (1,334,511 units). Taking into account the 1.5 per cent price hike and simultaneous increase in input costs, revenue is seen sliding 13 per cent to Rs 8,508.3 crore relative to Q3FY21.

Ebitda and PAT, too, could fall 22 per cent and 28 per cent quarter on quarter to Rs 1,108.2 crore and Rs 785.6 crore, respectively. Ebitda margin may plunge 143bps QoQ (up 245bps YoY) to 13 per cent.