Two-wheeler maker Hero Motocorp beat analysts’ expectations on Tuesday with September quarter standalone profit rising 1.1 percent year-on-year to Rs 772 crore on better operational performance despite subdued revenue growth and lower other income.
Revenue declined 1.1 percent to Rs 6,837.09 crore in quarter ended September 2015 compared to Rs 6,915.3 crore in same quarter previous fiscal due to tepid volume growth.
Total volume during the quarter declined 4.4 percent to 15.7 lakh units year-on-year due to subdued demand environment in rural markets.
Profit was estimated at Rs 717.2 crore (down 6 percent) on revenue of Rs 6,681 crore (down 3.4 percent) for the quarter, according to average of estimates of analysts polled by CNBC-TV18.
Realisations per vehicle increased 2.7 percent to Rs 43,414 in second quarter of current financial year compared to Rs 4,2258 in preceding quarter.
Second quarter saw beginning of a sales revival, says Pawan Munjal, chairman, MD & CEO of Hero Motocorp, adding he is cautiously optimistic that this trend will continue in second half of fiscal year.
He further says festive season could lead to positive sentiment in the market, which may help maintain momentum in coming months.
Operating profit (earnings before interest, tax, depreciation and amortisation) grew by 15.9 percent year-on-year to Rs 1,083 crore and margin expanded by 230 basis points to 15.8 percent in July-September quarter, which were higher than estimates of Rs 997.5 crore and 14.9 percent, respectively.
Operating profit on sequential basis expanded 70 basis points to 15.8 percent and gross margin increased 100 basis points to 31.8 percent in Q2.
Fall in raw material cost and cost cutting programme LEAP aided operational growth despite higher depreciation during the quarter. Cost of material consumed in Q2 declined 7.5 percent to Rs 4,630.2 crore and depreciation increased 45.3 percent to Rs 109 crore compared to year-ago period, Hero Motocorp says in its filing.
Other income declined 47 percent to Rs 102.6 crore and finance cost slipped to Rs 0.5 crore from Rs 4.94 crore year-on-year.
In Q3 (October-December quarter), the company says it further strengthened Splendor franchise by rolling out new Splendor Pro and introduced a variant of Splendor+ with a self-start features.
“We gained market share in 17 states at the end of Q2. Overall domestic market share is over 52 percent at end of September quarter,” the company’s management told CNBC-TV18.
“With launch of new Maestro Edge and Duet, we will gain share in scooter segment,” it added.
Speaking to CNBC-TV18, Rohan Korde of Prabhudas Lilladhar says on the back increased realisations, lower commodity prices and cost reduction, the company has been able to post better-than-expected numbers, especially margin numbers.
Mayuresh Joshi of Angel Broking says new launches and their foray in the premium segment need to be watched out for.