Two-wheeler major Hero MotoCorp is expected to report double-digit degrowth across parameters in the September quarter, but realisation may rise 1-3 percent on price hike.
Brokerages feel profit could fall by more than 10 percent which may get support from corporate tax rate cut, and revenue may decline 18-19 percent compared to the year-ago period due to lower volumes.
"Highly subdued volume performance coupled with higher discounts would impact its revenues, moreover, competitive pricing pressure and negative operating leverage due to inventory correction would impact its operating margin and profitability," Reliance Securities said.
Volumes declined by around 21 percent YoY (down 8.2 percent QoQ) to 16.91 lakh units during the quarter.
"We expect revenue to decline around 18 percent YoY as volumes failed to pick up. Realisation is expected to improve by around 1 percent, due to a price hike taken early in the quarter," said Edelweiss which expects profit to fall 10 percent.
According to Motilal Oswal, realisation is expected to grow by 2.5 percent YoY to Rs 43,683 per unit, largely led by price hikes and a higher share of spares.
Most brokerages feel the operating profit is likely to fall more than 25 percent and margin may contract over 100bps YoY in Q2.
"Operating margins are expected to contract 130bps YoY (down 50bps QoQ) to 13.9 percent led by negative operating leverage," said Prabhudas Lilladher which expects EBITDA to decline 25 percent YoY.
Higher discounting owing to a weak demand scenario also impacted operating margin.
The stock fell 14 percent year-to-date, in line with Nifty Auto index, but underperformed Nifty50 that gained nearly 7 percent.
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