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Hero Honda QFY2000 net surges by 44% - Views on News from Equitymaster
 
 
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  • Oct 13, 1999

    Hero Honda QFY2000 net surges by 44%

    Robust motorcycle sales have boosted Hero Honda's 2QFY2000 net to Rs 429 m (43.8% year on year rise). This was revealed by newspaper reports.

    Hero Honda, a joint venture between the Munjals and Honda Motors, is India's leading manufacturer of motorcycles (39% market share in September).

    Hero Honda's 44% net profit growth is attributed to a 33% rise in motorcycle sales (from 132,968 in 2QFY99 to 176,860 in 2QFY2000).

    The company's 1HFY2000 figures are even more impressive with net profit appreciating by 54% to Rs 813 m (Rs 527 m in 1HFY99). 1HFY2000 turnover posted 46.3% increase to Rs 10.4 bn (Rs 7.1 bn). Again this is attributed to higher motorcycle sales, which shot up by 37.2% in 1HFY2000 to 338,326 units (246,536 units).

    (Rs m) 2QFY2000 2QFY1999 Change
    Sales 5,478 3,819 43%
    Other Income 24 48 -50%
    Turnover 5,502 3,867 42%
    Expenditure 4,785 3,383 41%
    Interest 16 19 -15%
    Depreciation 77 55 39%
    PBT 624 410 52%
    Tax 196 112 74%
    Net Profit 429 298 44%

    The company has targeted motorcycle sales of 700,000 units, and sales turnover of Rs 20 bn, for FY2000. Given the company's performance so far, the motorcycle sales figure looks achievable, although the Rs 20 bn sales target may seem a little ambitious.

    With the company's plan to launch at least two motorcycle models every year, it seems well-prepared to take on competition from existing players (TVS Suzuki, Bajaj Auto), and future entrants (LML, Honda). Its market share has risen consistently over the years, but it cannot rest easy as competitors (Bajaj Auto, TVS Suzuki) continue to innovate and offer better products. With all three companies having technological tie-ups with Japanese manufacturers, future launches will vie for market share on technology as well as fuel-efficiency.

    Market view:
    Analysts have flagged the stock as a 'BUY', as the company has been riding the motorcycle boom with well-acknowledged brands, and future launches will help it sustain market share, if not enhance it.

     

     

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