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Hero Moto.: Poor sales, healthy profits - Views on News from Equitymaster
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Hero Moto.: Poor sales, healthy profits
May 9, 2016

Hero Motocorp Ltd announced fourth quarter results of the financial year 2015-2016 (4QFY16). The company has reported a 11% YoY and 71% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Revenues grow by 11% YoY with volumes growing by 9% YoY during 4QFY16.
  • Operating margins improve by 3.4% to 15.7% during the quarter on account of lower raw material costs (as percentage of sales).
  • Net profits grow by 71% YoY. However, on excluding the extraordinary expense in 4QFY15, net profit growth is restricted to 29% YoY because of higher depreciation charges and tax expenses.
  • The Board recommends a dividend of Rs 72 per share (dividend yield of 2.5%).

    Standalone financials: A snapshot
    (Rs m) 4QFY15 4QFY16 Change FY15 FY16 Change
    No. of two wheelers sold 1,575,501 1,721,240 9.3% 6,631,826 6,632,322 0.0%
    Net sales 67,939 75,122 10.6% 275,853 285,993 3.7%
    Expenditure 59,555 63,364 6.4% 240,431 241,523 0.5%
    Operating profit (EBDITA) 8,384 11,758 40.2% 35,422 44,470 25.5%
    EBDITA margin (%) 12.3% 15.7% 12.8% 15.5%
    Other income 929 1,024 10.3% 4,927 3,911 -20.6%
    Depreciation 897 1,155 28.6% 5,400 4,414 -18.3%
    Interest 8 5 -29.3% 111 22 -80.6%
    Profit before tax 8,408 11,623 38.2% 34,839 43,946 26.1%
    Exceptional item -1,550 0 -1,550 0
    Tax 2,092 3,481 66.4% 9,432 12,622 33.8%
    Profit after tax / (loss) 4,765 8,142 70.9% 23,856 31,324 31.3%
    Net profit margin (%) 7.0% 10.8% 8.6% 11.0%
    No. of shares (m) 199.7 199.7
    Diluted earnings per share (Rs)* 156.9
    Price to earnings ratio (x)* 18.7

    * based on 12 month trailing earnings & excluding extraordinary items

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