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Hero Moto Q4 Preview: Profit, revenue could see steep fall on lower volumes

HDFC Securities also sees 34 percent decline in profit for the quarter ended March 2020 YoY.

June 09, 2020 / 08:21 AM IST
In January-September, Hero Electric remained the leading player in the electric two-wheeler space with a market share of 35%

In January-September, Hero Electric remained the leading player in the electric two-wheeler space with a market share of 35%

 
 
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The COVID-19 crisis and nationwide lockdown in March is likely to have major impact on Hero Motocorp's Q4FY20 earnings. The company will announce earnings on June 9.

Brokerages expect more than 30 percent fall in profit and over 20 percent decline in revenue from operations as sales volumes plunged 25 percent year-on-year to 13.35 lakh units during the quarter.

"We expect revenues to decline by 23 percent YoY in Q4FY20 led largely by 25 percent YoY decline in total volumes," said Kotak Institutional Equities which sees 36 percent YoY fall in profit.

HDFC Securities also sees 34 percent decline in profit for the quarter ended March 2020 YoY.

However, the realisation may remain growing in single digit at around 5-6 percent over a corresponding quarter of last fiscal due to price hike.

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"Realization is expected to be up by 6 percent YoY in Q4FY20 on account of BS-VI transition. The company saw a general price increase of Rs 5,000-6,000 in shifting from BS–IV to BS–VI," Narnolia Financial Services said.

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On the operating front, its earnings before interest, tax, depreciation and amortisation (EBITDA) is also expected decline in double digits with range around 20-38 percent while margin could be impacted by 100-300 basis points YoY.

HDFC Securities expects the margin to contract by 300/420bps YoY/QoQ, while Kotak expects EBITDA to decline by 38 percent YoY led by negative operating leverage in Q4FY20 and margin to contract by 254 bps YoY.

Key thing to watch out for would be demand outlook in the rural areas, as these regions are less impacted by COVID-19.
Moneycontrol News
first published: Jun 9, 2020 08:21 am

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