Hero Motocorp Q3 net misses forecast, ad spends hit margins

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Hero Motocorp, the world's largest two-wheeler manufacturer by volume, missed street expectations with the third quarter net profit growing 7.5 percent to Rs 524.6 crore compared to same quarter last year.

Higher raw material cost, tax expenses and advertisement spends dented profitability. "There was a lag effect of second quarter rupee depreciation in the third quarter, but most of the profits have been offset by increase in tax rate," Anil Dua, senior vice president, marketing and sales said while addressing conference call.

Year-on-year net sales of the company, which announced after market hours, grew 11 percent, in-line, to Rs 6,876 crore in the quarter ended December 2013.

The CNBC-TV18 poll of analysts had expected the company to report net profit of Rs 621 crore on revenue of Rs 6,900 crore for the quarter.

Operational profit and margin was also lower than analysts’ expectations due to higher other expenses and advertisement spends. "We have incurred expenses for promotions and print media in Q3 that normally records high other expenses due to festive season," Dua said.

"We have incurred campaign spends on account of new launches. We have announced 15 new launches in October and another 5 recently. Hence, the marketing spends will continue to remain at 2-2.5 percent of revenues," he elaborated.

Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 15 percent to Rs 897 crore and operating profit margin increased 40 basis points in the quarter gone by. The forecast was 35 percent growth in EBITDA and 270 basis points rise in margin.

Y-o-Y cost of material consumed climbed 13 percent to Rs 4,978 crore in the October-December quarter while other expenses jumped 29 percent to Rs 736 crore during the same period.

Tax expenses during the quarter more than doubled to Rs 192 crore from Rs 94.7 crore year-on-year as tax benefit ended for Haridwar plant. "Tax rate has gone up to 27 percent as tax benefit from Haridwar plant ended," Dua said.

Meanwhile, total sales volume surged 7 percent on yearly basis (19 percent sequentially) to Rs 16.8 lakh units in the quarter gone by.

The stock extended loss in late trade, falling 3.43 percent to close at Rs 1,999.75 amid large volumes on the BSE.