Hero Motocorp Q1: MOST expects net to fall 9% at Rs 561 cr

Motilal Oswal has come out with its first quarter (April-June) earnings estimates for automobiles sector. The brokerage house expects Hero Motocorp to report a 2.3 percent degrowth quarter-on-quarter (down 8.9 percent year-on-year) in net profit at Rs 560.9 crore.

Revenues are expected to increase by 5.7 percent Q-o-Q (up 3.4 percent Y-o-Y) to Rs 6417.4 crore, according to Motilal Oswal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 9.4 percent Q-o-Q (down 3.6 percent Y-o-Y) to Rs 639.5 crore.

Motilal Oswal report on Hero Motocorp

We expect 1QFY13 volumes to decline 3.1 percent Y-o-Y (but improve 4.4 percent Q-o-Q), as rural demand recovers on better rabi crop harvest and expectations of a normal monsoon. Product mix is likely to remain sequentially stable.

Adjusted margins would expand 40bp Q-o-Q (shrink 70bp Y-o-Y) to 10 percent on favorable JPY/USD movement (vendors' imports; quarter lag) and pricing action of INR500-1,500/unit effective April 2013.

The demand environment for Hero MotoCorp has stabilized in the last few months. We estimate volume growth of 5 percent/13.4 percent for FY14/FY15.

We downgrade our FY14/FY15 EPS estimates by 3.4 percent/2 percent, as we moderate our FY14 growth assumptions on slower economic recovery and margin recovery getting impacted post the recent INR/USD depreciation.