The country’s largest two-wheeler manufacturer by volume, Hero MotoCorp on Tuesday beat street estimates by reporting a 1.1% growth in net profit at Rs 772.06 crore during the July-September quarter. The net profit was aided by higher realisations per unit on the back of reduced input costs and internal cost control measures though volumes were down.
Analysts had expected the company to post a decline in profitability primarily due to year-on-year contraction of 6.96% in sales volume during the quarter. Realisations per unit improved 5.6% to Rs 42,830 during the quarter.
During the period, the company’s net sales declined 1.72% to Rs 6,745.11 crore on a year-on-year basis. Total income also fell 1.1% to Rs 6837.1 crore. Ebitda margin improved from 13.52% in the July-September period last year to 15.85%. Ebitda stood at Rs 1,083.4 crore, which was up 15.9%.
Chairman and chief executive officer Pawan Munjal said the second quarter saw the beginning of a sales revival. “We are cautiously optimistic that this trend will continue in the second half of the fiscal year. The festive season could lead to positive sentiment in the market, which may help maintain the momentum in the coming months,” he said.
The company sold about 15.74 lakh motorcycles and scooters in the three months through September, compared to 16.92 lakh units sold in the same quarter last year, a decline of 6.96% on-year. In volume terms, the company has been struggling as it sells less number of two-wheelers in the domestic market due to lack of demand in a slowing rural economy, which constitutes close to half of its total sales.
Moreover, erstwhile joint venture partner Honda Motorcycle and Scooter India’s stronghold over the scooter market has been another factor hurting the company. To improve its position in the scooter segment, Hero MotoCorp has brought in two new scooter models, which have completely been developed in-house. In the first quarter of the current year, Honda took over the market leader position in three more states from Hero MotoCorp, according to data from Society of Indian Automobile Manufacturers.
In the second quarter of the fiscal year, Hero MotoCorp faced tax expenses of Rs 304.36 crore against Rs 285.06 crore in the previous year.
On Tuesday, Hero MotoCorp shares closed down 0.33% at Rs 2,606.05 on the BSE.