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Hero Motocorp Ltd: Strong Festive Demand Drives Growth! - Views on News from Equitymaster

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  • Nov 14, 2017 - Hero Motocorp Ltd: Strong Festive Demand Drives Growth!

Hero Motocorp Ltd: Strong Festive Demand Drives Growth!
Nov 14, 2017

Hero Motocorp ltd has announced its financial results for the second quarter of the financial year 2017-18 (2QFY18). During the quarter, revenues were up by 7% YoY and net profits were up by 1%.

Performance summary
  • For 2QFY18, net sales were up by 7% YoY. The volumes for the quarter increased by 11% YoY. The growth was driven by strong recovery in festive season. The management indicated that the demand came both from rural and urban regions.
  • Management indicated a sharp revival in the demand in both scooters and motorcycles segment. In fact, Hero gained market share during the quarter and expects the same to continue in the coming quarter.
  • Operating profits for the quarter were up by 6% YoY with margins contracting by 20 bps to 17.4%. The margins came in as a surprise as the increase in raw material prices were expected to put pressure on the margin. The margin came in strong on the back of LEAP program by the company.
  • Net profits increased by 1% YoY with margins contracting by 80 bps to 12.1%.

    Standalone Financial Performance Snapshot
    (Rs m) 2QFY17 2QFY18 Change
    No. of two wheelers sold 1,823,498 2,022,805 11%
    Net sales 77,963 83,620 7%
    Expenditure 64,274 69,063 7%
    Operating profit (EBDITA) 13,689 14,557 6%
    EBDITA margin (%) 17.6% 17.4%  
    Other income 1,524 1,176 -23%
    Depreciation 1,193 1,360 14%
    Interest 16 16 1%
    Profit before tax 14,004 14,357 3%
    Tax 3,962 4,252 7%
    Profit after tax / (loss) 10,042 10,105 1%
    Net profit margin (%) 12.9% 12.1%  
    No. of shares (m)   199.7  
    Diluted earnings per share (Rs)*   171.0  
    Price to earnings ratio (x)*   21.3  

    *trailing twelve-month earnings

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