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Hero Motocorp Q2 Results Preview: Here is what analysts are expecting

Hero Moto Q2: Demand recovery was slower than expected after the lifting of COVID-related restrictions. Margins are likely to be affected going ahead due to inflation in raw material prices and operating deleverage.

November 12, 2021 / 11:27 AM IST
 
 
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Hero Motocorp is expected to report a dip of about 30 percent in standalone Profit after Tax (PAT) for the quarter ended September 30, 2021, compared to last year while standalone revenues could contract 15 percent due to a significant decline in volumes even though there was improvement in the average selling price (ASP), said the analysts.

On a quarterly basis, the net profit is expected to increase by about 80 percent and revenues are likely to grow nearly 45 percent, they said.

India’s largest two-wheeler manufacturer is scheduled to declare its results for July-September quarter for FY22 on November 12.

The company had reported standalone profit after tax of Rs 953 crore in the corresponding quarter last year on revenues of Rs 9,367 crore. In the first quarter of this financial year, the company had recorded a PAT of Rs 365 crore on revenues of Rs 5,487 crore.

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“Revenues are expected to decline on lower volumes (-20% YoY) but realization is likely to be higher by 6%, owing to price hikes”, said Emkay Research.

The brokerage expects the company to report a decline of 15.7% y-o-y and an increase of 44% q-o-q in revenues to Rs 7,896 crore for the quarter.

This will result in a 32% y-o-y decline in EBITDA which is expected at Rs 872 crore compared to Rs 1,286 crore in the corresponding period last year. On a q-o-q basis, EBITDA is likely to improve by 69% from Rs 515 crore reported in the previous quarter.

“EBITDA margin may contract due to lower scale and delays in the pass-through of commodity inflation”, said Emkay. It estimates the EBITDA margin of 11% for the quarter declining from 13.7% last year and improving from 9.4% in the preceding quarter.

This works out to a PAT of Rs 633 crore for the quarter which is decline of 33.6% y-o-y and an increase of 73% q-o-q.

“Demand recovery was slower than expected after the lifting of COVID-related lockdown and margins are likely to be impacted due to raw material inflation and operating deleverage”, said Motilal Oswal on the performance of the company. However, price hikes and cost cutting may dilute the impact.

It expects the volumes for the quarter to decline 20.7% from 18.15 lakh units to 14.4 lakh units. On a sequential basis, the volumes are expected to grow smartly by 40% from 10.2 Lakh units.

Realizations are expected to grow 7.4% y-o-y to Rs 55,434 from Rs 51,620. Realizations in the previous quarter stood at Rs 53,559.

The brokerage expects the revenues of Rs 7,975 crore for the quarter, down 15% y-o-y and up 45% q-o-q.

This will result in a 27% y-o-y decline in EBITDA to Rs 935 crore from Rs 1,286 crore. On a q-o-q basis, EBITDA is to improve 82% from Rs 515 crore. Consequently, EBITDA margins may decline from 13.7% last year to 11.7% in this quarter. The company had reported EBITDA margins of 9.4% in the previous quarter.

PAT for the quarter is expected at Rs 684 crore, down 28% y-o-y and up 87% q-o-q.

“We expect revenues to decline by 15% y-o-y in 2QFY22 led by 20% y-o-y decline in volumes and 6% y-o-y increase in ASPs”, said Kotak Institutional Equities.

It expects the company to report revenues of Rs 7,936 crore for the quarter, down 15.3% y-o-y and up 44.6% q-o-q.

EBITDA margin is likely to increase by 200 bps q-o-q led by operating leverage benefits. “Gross margin will likely decline by 100 bps on a qoq basis as raw material cost pressures will get partly offset by price increases and LEAP savings”, said Kotak.

It expects EBITDA margins to come in at 11.4% resulting in a PAT of Rs 668 crore for the quarter, down 30% y-o-y and up 83% q-o-q.

The Hero Motocorp stock closed at Rs 2,700.90 on Thursday, down Rs 17.9 from its previous close. The performance of the stock is down 11.7% during the past one year and down 13% during this financial year. The stock is down 3% in the last one month.
Gaurav Sharma
first published: Nov 12, 2021 11:27 am

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