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Informist, Wednesday, May 7, 2025

By Anand JC

MUMBAI – Hero MotoCorp Ltd. is expected to post revenue growth in the low single digit for the March quarter despite a minor on-year fall in sales volume. The rise in profit will be largely driven by the higher average selling price of its two-wheelers after price hikes, according to analysts.

The Splendor-maker is expected to report a net profit of INR 11.0 billion for the reporting quarter, according to an average of 10 analyst estimates. While the company is likely to report an 8% on-year increase in its bottom line, the profit is likely to fall 9% sequentially.

A 1% on-year contraction in its March quarter wholesale sales is expected to limit Hero MotoCorp's revenue growth to 2.4% to INR 97.4 billion, analysts said. Sequentially, its top line is expected to fall a sharper 5%.

Hero MotoCorp makes scooters and motorcycles, with the latter sub-segment contributing to over 90% of its overall sales. In the March quarter, Hero MotoCorp sold 1.3 million motorcycles to dealers, down 2.8% on year and 7.4% sequentially. Scooter sales increased 25% on year to 121,029 units in the reporting quarter, and 17% sequentially.

The financial year 2024-25 (Apr-Mar) was a particularly difficult period for the entire automobile segment, but two-wheeler makers performed better than other automakers. The two-wheeler segment fared relatively better given its higher penetration in rural areas, where demand was better than in urban areas.

Though the company's sales missed analysts' estimates during the reporting quarter, its top line is expected to grow on the back of a higher average selling price of its two-wheelers. A rise in the number of premium models and 125 cubic centimetre capacity motorcycles in the mix, coupled with price increases, could help Hero MotoCorp's average selling price rise around 2-3% year-on-year, analysts said.

Axis Securities expects Hero MotoCorp's revenue growth to get a leg up from higher export volumes as well. Similar to other automobile makers, Hero MotoCorp's performance overseas was much better than in India, albeit on a lower base. The company sold 1.3 million two-wheelers in India during the March quarter, down 3.4% on year, but exported 100,785 units, up a staggering 51% on year.

Prabhudas Lilladher has forecast a 3.4% on-year growth in Hero MotoCorp's revenue to INR 98.4 billion, driven by a higher mix of motorcycle and electric scooters. The company currently is not a prominent player in the nascent but booming electric two-wheeler space, which is dominated by Ola Electric, TVS Motor, and newly listed Ather Energy. However, its market share in the electric scooter segment increased to 4.3% in March from 3.7% in January.

Hero MotoCorp's earnings before interest, taxes, depreciation, and amortisation for the March quarter is expected to increase 2% on year to INR 13.9 billion, as per consensus estimates. EBITDA, however, is expected to fall 6% sequentially. Nuvama Institutional Equities expects Hero MotoCorp's EBITDA margins to contract due to higher marketing expenditure, including spends at the Bharat Mobility Expo in January, and new product launches.

The company had reported an EBITDA margin of 14.3% in the base quarter, and of 14.5% in the December quarter. Axis Securities expects a richer product mix and cost control efforts by Hero MotoCorp to help its EBITDA margin grow 27 basis points while Kotak Institutional Equities has forecast a 10 bps on-year fall. Benefits of benign raw material prices during the March quarter could be partially offset by the ramping up of Hero MotoCorp's electric two-wheeler sales, HDFC Securities said.

The company will announce its March quarter earnings Tuesday. Since disclosing its December quarter earnings on Feb. 6, shares of the company have fallen roughly 9%. Wednesday, its shares closed slightly lower at INR 3,868 on the National Stock Exchange.

Following are the Jan-Mar earnings estimates for Hero MotoCorp based on reports from 10 broking firms in descending order of net profit:

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Edited by Rajeev Pai

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