Hero MotoCorp Q4 Results: Profit Falls On Lower Demand

Hero MotoCorp Ltd.’s fourth-quarter profit declined as raw material costs rose and demand remained tepid. The earnings, however, met estimates.

Standalone net profit of India’s largest two-wheeler maker fell to Rs 627 crore in the quarter-ended March, down 28% from a year earlier, according to an exchange filing. That compares with Rs 625-crore consensus estimate of analysts tracked by Bloomberg.

Sequentially, the profit fell 8.6%.

Highlights (YoY)

• Revenue declined 15% to Rs 7,421 crore versus the estimate of Rs 7,465 crore.

• Ebitda fell 32% to Rs 828 crore against the estimate of Rs 877 crore.

• Ebitda margin contracted to 11.2% versus 13.90%.

Sales volume fell 24% to 11.9 lakh units of motorcycles and scooters during the quarter as demand fell for the two-wheeler industry. Rising fuel and vehicle costs hurt the entry-level segment, which was also disrupted because of the coronavirus outbreak.

With the economy picking up and easing restrictions, Hero MotoCorp expects the demand for motorcycles and scooters to turn around in the coming months.

Niranjan Gupta, chief financial officer Hero MotoCorp, cited concerns over high input costs. "We will keep monitoring the situation and take judicious measures as appropriate," he said. The forecast of a normal monsoon is likely to aid the crops, improving cash flows in the rural sector.

All these factors, he said, are likely to help in a steady recovery in consumer sentiment and demand.

Gupta said the firm has lined up multiple launches in different segments and aims to continue building premium portfolio as well as premiumisation of existing models in FY23.

"In the coming months, the company will be able to drive profitable growth through the combination of key strategic initiatives such as acceleration of Leap-II savings program to offset the higher commodity prices and input costs and cash flow management."