Two-wheeler maker Hero Motocorp's quarterly earnings are expected to be weak due to demonetisation. Profit is seen falling 15.8 percent year-on-year to Rs 675.2 crore and revenue may decline 13.2 percent to Rs 6,328 crore in the quarter ended December 2016, impacted by lower sales volumes.
The company saw a severe drop in retail sales during the quarter and volumes were impacted the most in its 2-wheeler segment due to demonetisation.
Sales volumes fell 12.8 percent YoY in Q3 to 14.73 lakh units against 10.5 percent decline in Bajaj Auto's sales and a whopping 38.2 percent increase in Eicher Motors volume.
Facilities at Gurgaon, Haridwar and Neemrana were closed during December 26-31, 2016 due to annual maintenance, which also impacted December sales.
Operating profit during the quarter is expected to decline 19.3 percent to Rs 919 crore and margin may contract by 110 basis points to 14.5 percent.
High commodity costs, advertising spends and weak operating leverage, also increase in incentives due to festive season may put pressure on margin.
The stock has recovered 13 percent from demonetisation low. Analysts say Hero is expected to be the biggest beneficiary of the recovery in rural India and return of cash once it comes about.
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