Hero MotoCorp Q1 net profit flat at Rs 910 crore, misses estimates

Pawan Munjal at the launch of Hero XPulse at Auto Expo 2018

India’s largest two-wheeler maker Hero MotoCorp Wednesday posted a marginal 0.5 percent year-on-year (YoY) fall in standalone net profit to Rs 909.7 crore for the quarter ended June. In the same quarter last year the profit was Rs 914.04 crore.

The Delhi-based maker of motorcycles and scooters recorded a stand-alone total income of Rs 8,809.8 crore for the June quarter, an increase of 10.3 percent compared to Rs 7,980.5 crore (net of excise) posted in the corresponding quarter last year.

The impact on the profit was on account of the tax benefits coming to an end in Q4FY18 at the manufacturing facility at Haridwar.

The earnings before interest, tax, depreciation, and amortisation (EBITDA) margin at 15.6 percent for the quarter was impacted by commodity costs, although offset to a large extent by pricing and continuing cost management. EBITDA margin in the same quarter last year was 16.3 percent.

A Reuters poll had pegged the bottom line at Rs 1,001 crore and revenue of Rs 9,067 crore.

Hero MotoCorp, which makes bikes and scooters under the brands' Splendor, Passion, Maestro, and Duet clocked a volume growth of 14 percent to 2.1 million as against 1.8 million units in the same quarter last year.

"The Indian economy continues to grow in the face of global headwinds from several fronts. However, the industry has been adversely impacted by the volatility in commodity prices driven by global trends," Pawan Munjal, Chairman and Managing Director of Hero said in the release.

"Despite these challenges, the industry will maintain the growth momentum during the rest of the fiscal, with consumption expected to remain high on the back of a normal monsoon and the upcoming festive season. At Hero MotoCorp, we are geared up to ride the positive momentum with new premium motorcycles and scooters, lined up for launch in the coming months." he said.

The company's domestic sales grew 14 percent YoY to 2.06 million units, while exports grew slightly slower at 9 percent to 46,287 units.

Hero MotoCorp is the biggest beneficiary of the rebound in demand for motorcycles seen over the last few quarters, which in turn is because of rising rural income. Half of the company's volumes come from budget-category bikes such as Splendor, HF Dawn, and Passion.

The two-wheeler maker ended the June quarter with a share of 51 percent in the domestic motorcycle segment, having sold 1.87 million units, 17 percent more than in the corresponding quarter in 2017.

The company's growth was slower than that of the industry, where volumes grew by 19 percent to 3.6 million units during the quarter.

Hero MotoCorp's loss in market share in the motorcycle segment is a result of lower volumes from the entry-level bike segment, in which it sells the HF Dawn model.