Here's what to expect from Hero Moto Q3 earnings

Moneycontrol Bureau

Sluggish volume growth and margin pressures are expected to weigh on India's top two-wheeler maker Hero MotoCorp, which reports earnings for Oct-Dec on Thursday. Bajaj Auto on Wednesday reported third quarter results in-line with street expectations.

The maker of Splendor and Passion motorcycles is expected to report a net profit of Rs 580.14 crore, down 5 percent year-on-year, while net sales are likely to rise 1.5 percent at Rs 6,124.5 crore, according to a CNBC Awaaz poll.

Two-wheeler sales have been in the slow lane over last several months, which coupled with increased competition from erstwhile partner Honda and Bajaj Auto, has hurt Hero. In 2012, Honda Motorcycle & Scooter India entered the commuter motorcycle segment, where Hero is the king, with the launch of the Dream Yuga. Bajaj launched the Discover 125ST and this month launched the new Discover 100T, which also compete with Hero's Passion.

Its volumes are down 1 percent year-on-year in Oct-Dec.

Hero's EBITDA margins too are expected to contract on account of higher advertising and promotional spends, higher discounts offered, increased raw material cost on account of lag effect of rupee depreciation against Yen in Q2 and lower volumes.

Key things to Watch

-- Update on retail demand post the festive season
-- Margins in the quarter
-- Volumes and revenue guidance for the fourth quarter and FY14
-- Updates on new product development
-- Strategy to face intensifying competition in bread-butter commuter segment
-- Export plans

Stock Watch

Hero MotoCorp shares ended down 0.5 percent at Rs 1,834.60 on NSE on Wednesday. The sluggish volume growth has also had an impact on its shares. Since Sept-end, the stock has slipped 2.5 percent, underperforming the wider NSE Nifty, which is up 5 percent.

Many analysts are not too bullish on the Hero Moto at this point of time. Edelweiss, Motilal Oswal and Prabhudas Lilladher all, for instance, have a "reduce" rating on Hero MotoCorp.

Nachiket Kelkar
nachiket.kelkar@network18online.com