Hero MotoCorp Q3 Preview: Weak domestic demand, motorcycle sales to keep earnings growth muted

The Hero MotoCorp stock has tanked over 11 percent in the past three months.

Delhi-headquartered Hero MotoCorp Limited is set to release its earnings report for the third fiscal quarter of FY25 on February 6. Analysts expect muted growth in revenue, led by low motorcycle sales and a weak domestic market. Margins could face pressure due to higher discounts and rising electric vehicle (EV) contributions.

According to a Moneycontrol poll of seven brokerage firms, the Harley Davidson maker is anticipated to record a 3.8 percent year-on-year increase in revenue to Rs 10,099 crore. Net profit is projected to rise 4 percent to Rs 1,114 crore from Rs 1,073 crore in the same quarter of the previous fiscal year.

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Earnings estimates from analysts polled by Moneycontrol are in a narrow range, indicating that any positive or negative surprises could trigger a sharp reaction in the stock price.

What factors are driving Hero MotoCorp's earnings?

Analysts suggest that revenue growth and net profit could witness a marginal uptick while margins could contract amid large discounting and EV share.

EBITDA Contraction: EBITDA margins are expected to decline marginally year-on-year, primarily weighed down by a lower share of motorcycles, higher sales of lower-margin exports, festive season discounts, and a rise in EV sales. The company sold 14,63,802 units in the third quarter, just a tad higher than the 14,59,932 units sold in the same quarter of the previous fiscal.

Market share recovery: Rural demand recovery due to good monsoons and government policies aided by new vehicle launches, to drive the market share recovery witnessed during the Diwali festive season.

Muted Revenue: Subdued motorcycle sales and a sluggish domestic market to keep revenue growth muted. However, a 15 percent rise in exports helped offset some of the impact. Blended realisations are expected to see a marginal 0.5 percent decline quarter-on-quarter due to an unfavourable product mix, though higher spare parts sales should provide some relief.

What to look out for in the quarterly show?

Key aspects to monitor in the earnings report include the outlook for domestic demand and the trajectory of export growth. Analysts will also focus on the timeline for upcoming product launches which will be crucial in shaping the company's growth trajectory in the coming quarters.

Hero MotoCorp shares closed at Rs 4,237, lower by 1.2 percent from the last close on the NSE. Hero MotoCorp share price has tanked nearly 12 percent in the last three months.

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