Q1 Results: Hero MotoCorp’s Profit Beats Estimates On One-Time Gain

Hero MotoCorp Ltd.’s first-quarter profit beat estimates on account of a one-time gain.

Net profit rose 38.3 percent over last year to Rs 1,257 crore in the June quarter, India’s largest two-wheeler maker said in an exchange filing. That compares with the Rs 782-crore consensus estimate of analysts tracked by Bloomberg.

Higher profit during the quarter, the filing said, was led by a Rs 737.5-crore one-time gain from the reversal of a national calamity contingent duty that the company paid for its Haridwar plant. Hero MotoCorp was contesting this duty, and following a favourable Supreme Court order, the provision has been reversed as an exceptional item in Q1, it said.

The company’s revenue fell 8.9 percent year-on-year to Rs 8,030 crore in Q1. Analysts had pegged the figure at Rs 8,191 crore.

Its operating profit fell 15.9 percent over last year to Rs 1,158.4 crore—in line with the Rs 1,154-crore estimate. Operating margin, too, contracted 120 basis points to 14.4 percent over the year. That’s against 14.1 percent forecast.

“The overall economic and customer sentiments continued to be soft during the first quarter of this fiscal and their impact is clearly visible in the performance of the auto sector,” Chief Financial Officer Niranjan Gupta said in a media statement. “The outlook for the rest of the year will depend on multiple factors, including the progress of monsoon and festive season offtake as well as improvement in liquidity.”

The government, he said, should bring down the goods and services tax on two-wheelers to 18 percent from 28 percent to boost consumption. “A reduction in GST will lower the cost of two-wheelers and spur demand, with the consequent growth in volumes offsetting any impact on the government revenue.”

Hero MotoCorp sold 18.42 lakh units between April and June, a fall of 12.5 percent year-on-year, according to company’s disclosures.

This comes at a time Indian automakers are facing the worst slowdown in a decade. Sales at dealerships, measured by new vehicle registrations, too fell to an 18-month low in June. The slump forced auto and auto parts makers to layoff contract workers and dealers to shut showrooms.

On Tuesday, Hero MotoCorp shares fell 6.01 percent to Rs 2,259.35 apiece on the BSE while the benchmark Sensex shed 0.77 percent to end the day at 37,397.24 points. The Hero MotoCorp Q1 results were announced after market hours.