Hero MotoCorp Q2 profit beats estimates with 58 pct jump

Written by fe Bureau | New Delhi | Updated: Oct 17 2014, 01:34am hrs
HeroAnalysts had estimated that the two wheeler market leader would record profits of around Rs 700 crore for the quarter.
Hero MotoCorp handsomely beat street expectations with a 58% jump in profits for the quarter ending September 30, 2014 to Rs 763.37 crore on the back of higher volumes, stable rupee, increase in other income and the end of quarterly payments to erstwhile Japanese partner Honda for technology transfers. Analysts had estimated that the two wheeler market leader would record profits of around Rs 700 crore for the quarter.

Net sales in the quarter went up 20% to Rs 6,863.50 crore, almost in line with analysts' estimates of Rs 6.900 crore, while unit volumes were up 19.5% to 16.92 lakhs. EBITDA for Q2FY15 stood at 13.52%, lower than 14.5% in Q2FY14. In Q1 FY15, EBITDA was at 13.46%.

Pawan Munjal, vice-chairman, MD & CEO at Hero MotoCorp said, With the new stable government at the Centre, the sentiment in the entire country has turned positive. The Rupee depreciation, which had adversely impacted several sectors, and pulled up the costs of essential commodities, has also more or less stabilized. We will continue to be innovative in tackling any extraneous pressures to protect our margins.

He added, We are laying the roadmap for the future at Hero with a strong focus on technology and innovation. While our multi-location technology eco-system is working on the new product line, our customers have given a resounding affirmation to the innovation and technology-improvements on the existing platforms. These numbers bode well for the festive season and we are looking at leveraging this momentum to ensure record retail sales in the month of October.

Ravi Sud, CFO told FE that the biggest reason for the jump in profits was the end of payments to Honda, which amounted to almost Rs 200 crore before tax. This quarter was the first when the payment to Honda disappeared and we saved about Rs 146 crore because of that. We also divested some of our previous investments which was booked under other income this quarter. We also took a price hike in end-September, but the benefit of that will be felt in Q3, he said.

During the quarter, Hero invested Rs 13.75 crore into the wholly-owned subsidiary HMCL Netherlands B.V. The subsidiary would further invest these funds into Hero's Bangladesh joint venture where it has a 55% stake and is setting up a Rs 240 crore manufacturing plant with a local partner.

The Hero MotoCorp scrip at the BSE fell 2.27% to Rs 2,791.85 on Thursday amid a broad market sell off.