Hero Motocorp Q2 PAT seen up 1.5% at Rs 561 cr

Country's largest two-wheeler maker Hero Motocorp (erstwhile Hero Honda Motors) is likely to post a rise of 1.5% YoY in profit after tax of Rs 561 crore in the quarter ended September 2011. The company had posted profit of Rs 553 crore in the corresponding quarter of last fiscal.

Revenues are expected to go up by 27.5% to Rs 5,800 crore from Rs 4,552 crore year-on-year. Operating profit margin is seen declining at 12.6% as against 14% during the same period.

On quarter-on-quarter basis, revenues are likely to go up by just 2% and PAT is expected to be flat.

Overall 2W (2 wheeler) industry expectations

*Hero Moto to see volume outperformance in 2W segment this quarter, unaffected by high interest rates due to stronger rural reach 

*Total volume up 20% YoY at 15.44 lakh (as against Bajaj Auto volume growth at 16.3% and TVS Motor volume growth at 15.5%)  

*However, despite strong volume growth for both 2W, Hero Motocorp and BAL will see lower EBITDA growth due to YoY margin compression

*On profit front, TVS Motor will be the strongest performance this quarter with around 24% EBITDA growth, also due to low base.

Key highlights for Hero Motocorp

* Revenues to be supported by 20% volume growth

* Margins to be higher QoQ as raw material cost to come off; last quarter, raw material cost was at 74.7% - highest since June 2000  

* Realisations to improve 6% YoY (0.8% QoQ) to Rs 37148/unit due to price increases of Rs 500-600 taken on 24th June 2011

* Royalty now at fixed cost of Rs 177 crore/quarter

* Other expenses to be higher due to higher spends of around Rs 100 crore on corporate rebranding from this quarter

* Higher depreciation cost to impact profit growth

Volume growth in Q2FY12 -

* Outperformer in 2W, volume growth better than expected

* Q2FY12 total volume up 20% at 15.44 lakh versus 12.85 lakh

* H1FY12 Total volume up 22% at 30.7 lakh versus 25.19 lakh

* Hero Motocorp continues to regain its market share, currently at 45.9% (44% last quarter) versus 19.6% (versus 20.9% last quarter) for BAL and 14.6% (versus 15% last quarter)  for TVS Motor