The country’s largest two-wheeler manufacturer, Hero MotoCorp, beat analysts’ estimates on almost all fronts during the October-December quarter. Though volume growth was tepid at slow single digits at 2.54%, lower input costs and better realisations led the company post a 36.5% jump in net profit at Rs 796 crore. Revenue increased 6.7% to Rs 7,295 crore.
The company sold 16.9 lakh units in Q3, up 2.5% compared to a year-ago period. Operating profit increased 38.7% year-on-year to Rs 1,140 crore and margin expanded by 360 basis points to 15.6%. The net realisation per unit was up 3% while input costs declined 1% on year.
“Domestic two-wheeler market continues to be sluggish, we expect sentiments to remain subdued for next couple of quarters,” Pawan Munjal, chairman, MD & CEO said, adding that demand in rural markets has been severely impacted due to two consecutive sub-normal monsoons.
Speaking to analysts after the results announcement, the management said that it is not expecting double digit growth in the two-wheeler sales in the next fiscal also. During the April-December period, two-wheeler sales have seen a tepid growth of 1.21%, with motorcycle sales declining 2.46% and scooter sales recording double digit growth. “In term of retail sales, there is a sustained sluggishness in the rural markets,” the management said.
Going forward, the company is expecting growth in scooter sales. Hero MotoCorp launched two indigenously developed scooters in the October-December period and the models are being gradually introduced in different markets across the country. The company is betting on its strong sales network for the penetration of scooters in the rural markets.
The management maintained a cautious outlook for the year 2016-17. “The domestic two-wheeler market continues to be sluggish; expect sentiments to remain subdued for the next couple of quarters,” Munjal said.