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Informist, Monday, Oct. 21 2024

 

By Darshan Nakhwa 

 

MUMBAI – Hero MotoCorp Ltd. is expected to report healthy growth in key earnings metrics for the September quarter, estimates from brokerages show. This growth will be primarily driven by a 7% year-on-year increase in wholesale volumes led by higher sales of premium motorcycles and exports. The increase in average selling price on account of price hikes taken during the year is also expected to aid the company's earnings growth. 

 

The two-wheeler manufacturer is expected to clock a net profit of INR 11.56 billion in Jul-Sept, up 10% from a year ago, according to an average of estimates from 10 brokerages. The projections for net profit by brokerage ranged from INR 11.24 billion by Yes Securities (India) to INR 12.02 billion by Prabhudas Lilladher.

 

Hero MotoCorp's top line is seen at INR 102.56 billion, up 9% from a year ago, according to the average of estimates. The highest and the lowest estimates for revenue were INR 101.33 billion by Nuvama Wealth Management and INR 103.43 billion by Nomura Equity Research, respectively.   

 

Sequentially, the net profit and revenue are seen growing by 3% and 1%, respectively.

 

According to Kotak Institutional Equities, Hero MotoCorp's top line will be driven by a 7-8% on-year increase in wholesale volumes led by a ramp-up of Xtreme 125 volumes and 1-2% on-year growth in average selling price. Axis Securities expects the premiumisation trend in overall sales and higher export volumes to aid the company's top line. 

 

While Motilal Oswal Financial Services has pegged the company's realisation per unit at INR 67,398, YES Securities has estimated it at INR 67,500 per unit. The company's realisation per unit was INR 66,680 in Jul-Sept last year and INR 66,076 in Apr-Jun this year, according to Motilal Oswal Financial Services.  

 

The company's earnings before interest, tax, depreciation, and amortisation in the September quarter are estimated at INR 14.99 billion, representing a growth of 13% from a year ago and 3% from a quarter ago, according to the average of nine estimates. The estimates for EBITDA ranged from INR 14.55 billion to INR 15.30 billion. 

 

Hero MotoCorp's EBITDA margin is expected to expand to 14.6% in Jul-Sept from 14.1% in the year-ago period and 14.4% in the June quarter, according to the average of estimates from nine brokerages. The company is expected to report an expansion in margins, led by a richer product mix, price hikes, cost reduction efforts and operating leverage benefits.

 

"Its (Hero MotorCorp's) product mix has remained relatively stable while input costs have also remained stable. However, its investment towards EV (electric vehicle) business could offset the operating leverage. As a consequence, we anticipate moderate EBITDA margin expansion of 74 bps on year," Prabhudas Lilladher said in a report. 

 

"We expect EBITDA margin to improve by 40 bps on quarter mainly driven by commodity tailwinds and lower advertising spends," Kotak Institutional Equities in a report said.

 

During the September quarter, Hero MotoCorp's cost of raw materials consumed as a percentage of revenue is expected to decline to 67.7% from 68.6% a year ago and flat from a quarter ago.

 

Prices of aluminium, copper, and natural rubber rose 9-52% on year in Jul-Sept. However, prices of domestic and Chinese cold-rolled coil steel were down 5% and 20%, respectively. On a sequential basis, prices of domestic and Chinese cold-rolled coil steel, aluminium, lead and copper declined 5.5-18.2%. However, prices of natural rubber jumped 20%, according to data from Kotak Institutional Equities. The impact of the change in prices of raw materials is usually reflected in the earnings of automakers, with a lag of a quarter.

 

SALES VOLUME

Hero MotoCorp's total two-wheeler sales in Jul-Sept rose 7% from a year ago but fell 1% from a quarter ago to 1.52 million units. The year-on-year sales growth was powered by an improvement in rural demand due to the above-normal monsoon and the expectation of strong demand during Ganesh Chaturthi and Onam. This growth was also on the back of a low base last year as the company had reported weakness in sales of entry-level motorcycles due to sluggish rural demand.

 

Hero MotoCorp sold a total of 1.46 million two-wheelers in India in Jul-Sept, registering a growth of nearly 7% from a year ago, but down 2% from a quarter ago. The company exported 63,180 units during the quarter, up 20% on year and 24% sequentially.

 

Within two-wheelers, Hero MotoCorp sold 1.42 million motorcycles in the September quarter, representing a growth of 8% on year but a decline of 2% on quarter. In comparison, its scooter sales fell by 5% on year but were up by 10% on quarter to 103,550 units. 

 

On Monday, shares of Hero MotoCorp closed at INR 5,242.25 on the National Stock Exchange, up 0.5%. The company's stock had gained 19?ter its June quarter earnings announcement to a 52-week high of INR 6246.25 on Sept. 24. The stock has since lost all its gains.

 

The two-wheeler manufacturer is yet to announce the date for its Jul-Sept earnings.

 

Following are the Jul-Sept earnings estimates of Hero MotoCorp, in INR million, from 10 brokerages:

 

Brokerage	Net Sales	Net Profit	EBITDA
Axis Securities Ltd	102,850	11,710	15,050
Elara Securities (India) Pvt Ltd	101,921	11,351	15,084
Kotak Institutional Equities	102,742	11,662	15,244
Motilal Oswal Financial Services Ltd	102,423	11,267	14,678
Nirmal Bang Equities Pvt Ltd	102,955	11,877	15,237
Nomura Equity Research	103,427	11,686	15,142
Nuvama Wealth Management Ltd	101,325	11,455	14,589
Prabhudas Lilladher Pvt Ltd	103,359	12,023	15,297
Sharekhan Ltd	101,920	11,360	----
YES Securities (India) Ltd	102,624	11,238	14,547
Average	102,555	11,563	14,985

 

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Saji George Titus

 

 

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