Hero MotoCorp Q2 Preview: Volume uptick, rich mix may help net profit rise by 9%

The Hero MotoCorp stock has gained nearly 15 percent since the start of the year.

Hero MotoCorp, the world's largest two-wheeler manufacturer, is set to release its earnings for the second fiscal quarter of FY25 on November 14. A sharp rise in exports and robust volume growth is expected to boost the company's sales and profit positively.

According to a Moneycontrol poll of eight brokerage firms, the Harley Davidson maker is anticipated to record an 8 percent year-on-year increase in revenue, reaching Rs 10,223 crore. Net profit is projected to surge 9 percent to Rs 1,147 crore, up from Rs 1,054 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.

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What factors could affect earnings?

A sharp rise in volumes, a higher mix of exports and a rich mix are likely to positively impact the company. However, the EV business, still loss-making could offset leverage even as raw material prices didn't see any serious uptick.

Rise in Volumes:  An increase in volumes, higher average selling price due to price hikes taken during the year, premiumization trend and higher export volumes is expected to bode well for the Delhi-based two-wheeler major. Total volumes for the quarter stood at 15.2 lakh units higher than the 14.1 lakh units sold in the same quarter of the previous fiscal year.

Steady EBITDA: The growth was primarily driven by a richer product mix, with higher sales volumes of premium motorcycles and exports, along with price hikes and cost-control efforts. However, these gains were partly offset by increased personnel costs. As per the Moneycontrol poll, EBITDA margin will likely improve by 40 basis points.

Struggling EV Business: Prabhudas Lilladher suggests that its EV business could offset the operating leverage even as the raw material costs and product mix have largely been stable during the quarter.

What to look out for in the quarterly show?

Key things to watch out for are the demand outlook in domestic and overseas markets and new product timelines. The quarter has been shaky for two-wheelers especially after Bajaj Auto trimmed its guidance to 5 percent.

For the sector, the momentum is expected to continue in the upcoming quarters on account of a good monsoon and wedding days in consistent months, which shall translate into a healthy demand moment.

At about 1 pm, Hero MotoCorp shares were trading marginally lower at Rs 4,746 on the NSE. The Hero MotoCorp stock has gained nearly 15 percent since the start of the year.

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