Two-wheeler maker Hero MotoCorp is expected to report a mixed set of earnings for the quarter ending December 2018 as brokerages say revenue is likely to increase by more than 5 percent driven by higher realisation and volume.
Edelweiss Securities expects revenue growth of 6.5 percent YoY, largely driven by volume growth of 5 percent YoY and higher realisations while Kotak Securities expects revenues to increase 5 percent YoY led largely by volume growth.
Sales volumes during the quarter increased by 5.3 percent YoY to 18 lakh units but the same declined 15.7 percent sequentially.
According to Motilal Oswal, which sees revenue growth of 5.7 percent (down 15 percent QoQ), the realisation is expected to grow 0.4 percent YoY (up 0.9 percent QoQ) to Rs 42,983 per unit, largely led by price hikes.
Profitability is likely to be impacted by weak operating performance during the quarter ended December 2018.
Overall brokerages expect the profit to decline in the range of 4-21 percent year-on-year as the raw material cost may impact operating income.
Emkay, Motilal Oswal, Prabhudas Lilladher, Reliance Securities and ICICI Securities expect profit to decline 2-6 percent whereas Kotak Securities and Antique Stock Broking see more than 21 percent decline in bottomline.
Emkay said EBITDA margin should contract 130bps QoQ (-200bps YoY) due to commodity inflation, adverse currency, higher incentives/discounts and a lower scale.
Kotak expects the maximum decline in EBITDA margin at 350 bps YoY. Edelweiss Securities said operating margin may contract 130bps sequentially impacted by higher costs due to the launch of the Xtreme 200cc (motorcycle) and the Destini 125cc (scooter).
Key issues to watch out for
> Update on demand trend in rural and urban markets
> Level of inventory in the system
> New product launches and the timelines
> Outlook on exports
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