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Hero MotoCorp Q3 earnings beat estimates, profit rises 14.5% to Rs 880 cr

The company also declared an interim dividend of Rs 65 per share of Rs 2 each for the financial year 2019-20.

February 06, 2020 / 07:22 PM IST
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Hero MotoCorp on February 6 reported a 14.5 percent growth in its December quarter profit at Rs 880 crore, largely driven by sharp fall in tax cost.

The profit in October-December of 2018 stood at Rs 769.1 crore.

Revenue from operations fell 11 percent year-on-year (YoY) to Rs 6,996.7 crore for the three months to December 2019, hit by a 14.3 percent decline in total sales volume, but offset by higher realisation of 2.8 percent.

Hero sold 15.4 lakh units during the quarter under review as against more than 17.98 lakh in the same period last year, the company said in its BSE filing.

"The two-wheeler industry continues to face challenges amid an overall economic slowdown. Early indicators such as a positive Rabi crop augur well for the rural economy, which in turn is likely to help the industry. The slew of measures announced by the finance minister as part of the Union Budget earlier this week would also go a long way in reviving the economy. However, it will take some time for the two-wheeler industry to see a sustained recovery," said Niranjan Gupta, Chief Financial Officer.


The company expects to see a turnaround in the second half of 2020-21, he added.

At operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 6 percent to Rs 1,039 crore, but margin saw 80bps expansion YoY at 14.8 percent in December ended quarter due to lower raw material cost.

Earnings beat analyst expectations on all parameters. Profit was estimated at Rs 683 crore on revenue of Rs 6,896 crore and EBITDA was expected at Rs 921.3 crore with margin at 13.3 percent for the quarter, according to the average of estimates of analysts polled by CNBC-TV18.

"While we see long-term potential in the rural market for entry level bikes, we expect the recovery will only be gradual. we expect Hero MotoCorp (HMCL) to have the most challenging time due to 2x the industry average inventory and emission norm change related cost pressure," Dolat Capital said.

The brokerage believes volume growth and margin improvement will be restricted in FY21 as well, given regulation-led cost pressures with implementation of BS6 emission norms and competitive intensity.

Tax expenses for the quarter at Rs 131.12 fell sharply by 64.50 percent YoY, following the cut in corporate tax rate by the government last year.

Meanwhile, the board members declared an interim dividend of Rs 65 per share of Rs 2 each for the financial year 2019-20.
Moneycontrol News
first published: Feb 6, 2020 06:31 pm

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