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Dolat Capital Report
Hero MotoCorp Ltd.'s Q2 numbers beat estimates led by better than expected net average selling price (strong spare parts revenue and price hike) and efficient cost management (leap saving 320 basis points YoY). Gross profit per vehicle was up by 10.7% QoQ to Rs 16,28000/vehicle.
Management stated that festive period demand (Navratra and Diwali period) was muted as delayed monsoon and increased price hit rural demand. However rural demand to pick up from hereon led by record Kharif harvesting and marriage season demand
Raw material cost inflation continued to pose a challenge, commodity inflation was partly mitigated by price hike (Rs 3000/ vehicle in H1 FY22 and leap saving of 320 bps YoY).
Price increases have to be calibrated as retail demand is weak, and might be required to be phased out.
Hero MotoCorp’s sustained efforts to expand its footprint in exports, premium bikes, scooters and electric vehicle augur well.
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