Hero Honda: 'Splendor' in 2Q numbers - Views on News from Equitymaster

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Hero Honda: 'Splendor' in 2Q numbers

Oct 17, 2001

Hero Honda has beaten market expectations by reporting a 63% jump in second quarter profits. The company's topline too grew impressively by 41%. A slew of new launches including the likes of ‘Passion’ (a substitute for Splendor), ‘Joy’ (the low end segment) and ‘CBZ’ (the premium segment) have performed extremely well, pushing up the volume growth.

(Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
Sales 7,394 10,385 40.5% 14,676 19,905 35.6%
Other Income 65 171 160.7% 142 200 40.5%
Expenditure 6,445 8,924 38.5% 12,784 17,110 33.8%
Operating Profit (EBDIT) 949 1,461 54.0% 1,893 2,794 47.6%
Operating Profit Margin (%) 12.8% 14.1%   12.9% 14.0%  
Interest 6 4 -26.8% 14 8 -40.0%
Depreciation 115 111 -4.1% 211 252 19.6%
Profit before Tax 893 1,517 69.8% 1,811 2,734 51.0%
Tax 291 533 83.5% 605 963 59.1%
Profit after Tax/(Loss) 603 983 63.2% 1,206 1,772 46.9%
Net profit margin (%) 8.2% 9.5%   8.2% 8.9%  
No. of Shares (eoy) (m) 199.7 199.7   199.7 199.7  
Diluted number of shares 199.7 199.7   199.7 199.7  
Earnings per share (Rs)* 12.1 19.7   12.1 17.7  
(*annualised)            

The company's earnings growth in the current quarter was inflated by higher other income (profit on sale of investments). Excluding other income figure from the respective quarters, profits have actually grown by 51%. Similarly, tax provision jumped by 84% on account of provision for deferred tax liability according to AS-22.

Segment-wise revenue…
Category 2QFY02 1HFY02
Motorcycles 95.1% 95.6%
Spares 4.9% 4.4%
Total 100.0% 100.0%

Among other developments, the company declared dividend of Rs 5 per share (on a face value of Rs 2 per share). It has also increased the FII investment limit to 40%. These factors coupled with its strong performance are likely to drive up Hero Honda's stock price. At the current market price of Rs 206, Hero Honda is trading at a P/E of 10x 2QFY02 annualised earnings.


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