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Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! - Views on News from Equitymaster
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  • Aug 1, 2017 - Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins!

Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins!
Aug 1, 2017

Hero Motocorp ltd has announced its financial results for the fourth quarter of the financial year 2017-18 (1QFY18). During the quarter, revenues were up by 7.5% YoY and net profits declined by 3.5%.

Performance summary
  • For 1QFY18, net sales were up by 7.5% YoY. The volumes for the quarter increased by 6.2% YoY. The growth was driven by strong recovery in the scooters segment. Further, the company got the benefits of pre-GST buying.
  • During the quarter, the company took price hike in the range of Rs 400 to 2,000 across products. The price hike was partially offset by the increase in the raw material prices. The realisations were up 1.2% YoY.
  • Operating profits for the quarter were up by 5.4% YoY with margins contracting by 30.9 bps to 15%. The margins came in as a surprise, as the increase in raw material prices were expected to put pressure on the margin.
  • Net profits increased by 3.5% YoY with margins contracting by 41.1 bps to 10.6%.

    Standalone Financial Performance Snapshot
    (Rs m) 1QFY17 1QFY18 Change
    No. of two wheelers sold 1,745,389 1,853,647 6.2%
    Net sales 80107 86129 7.5%
    Expenditure 67805.8 73170.0 7.9%
    Operating profit (EBDITA) 12,301 12,959 5.4%
    EBDITA margin (%) 15.4% 15.0% -30.94
    Other income 1203.7 1317.0 9.4%
    Depreciation 1152.4 1329.5 15.4%
    Interest 15.0 15.8 5.3%
    Profit before tax 12,337 12,931 4.8%
    Tax 3506.2 3790.4 8.1%
    Profit after tax / (loss) 8,831 9,140 3.5%
    Net profit margin (%) 11.0% 10.6% -41.15
    No. of shares (m)   199.7  
    Diluted earnings per share (Rs)*   170.7  
    Price to earnings ratio (x)*   21.6  

    *based on 12 month trailing earnings

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Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

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  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report.
  2. Equitymaster has financial interest in Hero Motocorp Limited.
  3. Equitymaster’s investment in the subject company is as per the guidelines prescribed by the Board of Directors of the Company. The investment is however made solely for building track record of its services.
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