Hero Honda Motors Limited has reported a turnover of Rs 4.9 bn (up 51% YoY) and a net profit of Rs 380 mn (up 68% YoY) for the quarter ended 30th June 1999. It has also reported a 42% jump in volumes to 161,000 nos. for the period under consideration.
Hero Honda Motors Ltd. (HHL) is India's largest manufacturer of 100-cc motorcycles (market share of 42%). The company is a joint venture between the Hero Group and Honda, Japan.
The motorcycle segment of the Indian two wheeler industry has been witnessing strong demand, primarily from semi urban and rural markets. HHL, with its fuel-efficient motorcycles, has capitalised on this demand which has resulted in the company gaining market share. The company's wide distribution reach has given it a competitive advantage over several of its competitors.
The company is well placed to meet the emission norms, to be enforced from 1st April 2000 onwards, as all its products are already based on 4-stroke technology. As a result of this advantage, the company would incur lower expenses, as compared with its peers, to satisfy the more stringent emission norms.
HHL has been facing increasing competition form the new models introduced by Bajaj Auto Ltd. This has however not yet affected the rate of growth of sales at HHL.
The stock has been rated as a 'BUY' mainly on account of strong brand name, wide distribution network, and alliance with Honda which give HHL a unique competitive advantage.
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