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Hero Motocorp Ltd: Finishes the year with multiple Headwinds. What next? - Views on News from Equitymaster
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  • May 22, 2017 - Hero Motocorp Ltd: Finishes the year with multiple Headwinds. What next?

Hero Motocorp Ltd: Finishes the year with multiple Headwinds. What next?
May 22, 2017

Hero Motocorp ltd. has announced its financial results for the fourth quarter of the financial year 2016-17 (4QFY17). During the quarter, revenues were up down by 7.7% YoY and net profits declined by 13.9%.

Performance summary
  • For 4QFY17, net sales were down by 7.7% YoY. After the subdued performance in the last quarter due to demonetisation, there wasn't any recovery to speak of. The volumes for the quarter declined by 5.8% YoY. This was despite the aggressive discounting to get rid of BS-III vehicles.
  • During the quarter the company took price hike in the range of Rs 500 to 2,200 across products. The price hike partially offset the aggressive discounts and the increase in the raw material prices. The realisations were down 2% YoY.
  • Operating profits for the quarter were down by 19.5% YoY with margins contracting by 187bps to 12.8%. The pressure on the margins were on account of aggressive discounting to dump the BS-III vehicles and increase in the raw material prices.
  • Net profits declined by 13.9% YoY with margins contracting by 68.8 bps to 9.6%.
  • For FY17, the top line grew marginally by 0.8% YoY, while net profits grew by 4.9% YoY. Further, the company has declared a final dividend of Rs 30 per share, this was in addition to an interim dividend of Rs 55 per share.

    Consolidated Financial Performance Snapshot
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    No. of two wheelers sold 1,721,240 1,621,805 -5.8% 6,632,322 6,664,240 0.5%
    Net sales 81112 74881 -7.7% 307,153 309,582 0.8%
    Expenditure 69220 65305 -5.7% 263,176 263,822 0.2%
    Operating profit (EBDITA) 11,892 9,576 -19.5% 43,977 45,760 4.1%
    EBDITA margin (%) 14.7% 12.8% -187.32 14.3% 14.8% 46.35
    Other income 1168 1182 1.3% 4,128 5,220 26.4%
    Depreciation 1147 1353 17.9% 4,433 5,023 13.3%
    Interest 12 15 21.3% 146 273 86.7%
    Profit before tax 11,900 9,390 -21.1% 43,527 45,684 5.0%
    Tax 3567 2213 -38.0% 12,747 13,391 5.1%
    Profit after tax / (loss) 8,333 7,178 -13.9% 30,780 32,293 4.9%
    Net profit margin (%) 10.3% 9.6% -68.81 10.0% 10.4% 41.02
    No. of shares (m)   199.7        
    Diluted earnings per share (Rs)*   169.1        
    Price to earnings ratio (x)*   21.5        
    *trailing twelve-month earnings
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