Hero Honda, the market leader in the motorcycles has reported a robust 39% growth in net and a 43% growth in sales in the 2QFY01. This has been driven by higher volumes and increase in its market share in the first half of the current financial year.
The company's operating profit has gone up by 36% YoY in the 2QFY01, however operating margins have dipped slightly to 12.8% in the 2QFY01 to 13.5% in the 2QFY00. However due to lower interest costs the net margins have dipped only slightly to 8.2%.
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The pressure on the operating margins has come mainly from higher competition from new players like Bajaj Auto. As Bajaj Auto has been resorting to discounts, Hero Honda too has not been able to increase prices to a large extent. The company's marketing costs too would have gone up.
For the period April-August 00 the company sold 393,416 units a growth of 42% YoY. The company's market share as a result went up to 48% in the current financial year as compared to 42% in FY2000.
Yamaha Motor Escorts
Hero Honda has managed to do well as it has continuously come out with new products in the market. This being despite higher competition from newer entrants to this market.
The motorcycle industry is the only one in the automobile segment to have had a worth while performance over the past months and Hero Honda has continued to grow and maintain its leadership in this segment. The share of motorcycles in India's two wheeler market has gone upto 55% for the period of April-August 00, while that of scooters has declined to 27% during this period.
However we could see a slowdown in the motorcycle segment in the FY02, as agriculture growth is expected to be a dismal 1% in the current financial year. This would lead to lower demand from the rural segment which accounts for 55% of motorcycle sales.
On the current price of Rs 950 it is trading at 19.8x FY00 EPS of Rs 48.1. The shares closed up 3.5% on the expectation of good results.
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