HERO MOTOCORP 2017-18 Annual Report Analysis

Sat, 31 Mar

HERO MOTOCORP has announced its results for the year ended March 2018. Let us have a look at the detailed performance review of the company during FY17-18.

HERO MOTOCORP Income Statement Analysis

• Operating income during the year rose 21.3% on a year-on-year (YoY) basis.
• The company's operating profit increased by 16.4% YoY during the fiscal. Operating profit margins witnessed a fall and stood at 16.7% in FY18 as against 17.4% in FY17.
• Depreciation charges increased by 14.5% and finance costs increased by 12.9% YoY, respectively.
• Other income grew by 0.2% YoY.
• Net profit for the year grew by 13.7% YoY.
• Net profit margins during the year declined from 12.3% in FY17 to 11.5% in FY18.

HERO MOTOCORP Income Statement 2017-18

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Net Sales	Rs m	262,372	318,158	21.3%
Other income	Rs m	5,220	5,232	0.2%
Total Revenues	Rs m	267,592	323,390	20.9%
Gross profit	Rs m	45,760	53,251	16.4%
Depreciation	Rs m	5,023	5,750	14.5%
Interest	Rs m	273	308	12.9%
Profit before tax	Rs m	45,684	52,424	14.8%
Tax	Rs m	13,391	15,699	17.2%
Profit after tax	Rs m	32,293	36,725	13.7%
Gross profit margin	%	17.4	16.7
Effective tax rate	%	29.3	29.9
Net profit margin	%	12.3	11.5

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HERO MOTOCORP Balance Sheet Analysis

• The company's current liabilities during FY18 stood at Rs 45 billion as compared to Rs 42 billion in FY17, thereby witnessing an increase of 7.3%.
• Long-term debt down at Rs 1 billion as compared to Rs 2 billion during FY17, a fall of 28.0%.
• Current assets rose 19% and stood at Rs 90 billion, while fixed assets rose 12% and stood at Rs 98 billion in FY18.
• Overall, the total assets and liabilities for FY18 stood at Rs 188 billion as against Rs 164 billion during FY17, thereby witnessing a growth of 15%.

HERO MOTOCORP Balance Sheet as on March 2018

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Networth	Rs m	103,116	119,647	16.0
Current Liabilities	Rs m	41,767	44,814	7.3
Long-term Debt	Rs m	2,079	1,496	-28.0
Total Liabilities	Rs m	163,942	188,477	15.0
Current assets	Rs m	75,705	90,022	18.9
Fixed Assets	Rs m	88,237	98,455	11.6
Total Assets	Rs m	163,942	188,477	15.0

HERO MOTOCORP Cash Flow Statement Analysis

• HERO MOTOCORP's cash flow from operating activities (CFO) during FY18 stood at Rs 40 billion, an improvement of 0.3% on a YoY basis.
• Cash flow from investing activities (CFI) during FY18 stood at Rs -19 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY18 stood at Rs -21 billion on a YoY basis.
• Overall, net cash flows for the company during FY18 stood at Rs 566 million from the Rs -6 million net cash flows seen during FY17.

HERO MOTOCORP Cash Flow Statement 2017-18

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-17	Mar-18
Cash Flow from Operating Activities	Rs m	40,072	40,172	0.3%
Cash Flow from Investing Activities	Rs m	-19,720	-18,582	-
Cash Flow from Financing Activities	Rs m	-20,359	-21,025	-
Net Cash Flow	Rs m	-6	566	-

Current Valuations for HERO MOTOCORP

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 183.9, an improvement from the EPS of Rs 161.7 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 3,545.5, stands at 280.0 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 6.2 times, while the price to sales ratio stands at 2.3 times.
• The company's price to cash flow (P/CF) ratio stood at 17.3 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Sales per share (Unadj.)	Rs	1,313.8	1,593.1
TTM Earnings per share	Rs	161.7	183.9
Diluted earnings per share	Rs	161.6	183.8
Price to Cash Flow	x	17.3	17.3
TTM P/E ratio	x	254.6	280.0
Price / Book Value ratio	x	6.2	6.2
Market Cap	Rs m	641,973	736,935
Dividends per share (Unadj.)	Rs	85.0	95.0

Ratio Analysis for HERO MOTOCORP

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 2.0x during FY18, from 1.8x during FY17. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio improved and stood at 171.2x during FY18, from 168.5x during FY17. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at 30.7% during FY18, from 31.3% during FY18. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company declined and down at 43.5% during FY18, from 43.7% during FY17. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company declined and down at 19.6% during FY18, from 19.9% during FY17. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Current ratio	x	1.8	2.0
Debtors’ Days	Days	2	2
Interest coverage	x	168.5	171.2
Debt to equity ratio	x	0.0	0.0
Return on assets	%	19.9	19.6
Return on equity	%	31.3	30.7
Return on capital employed	%	43.7	43.5

To see how HERO MOTOCORP has performed over the last 5 years, please visit here.

HERO MOTOCORP Share Price Performance

Over the last one year, HERO MOTOCORP share price has moved up from Rs 3,223.9 to Rs 3,545.5, registering a gain of Rs 321.7 or around 10.0%.

Meanwhile, the S&P BSE AUTO Index is trading at Rs 24,057.3 (down 0.1%). Over the last one year it has moved up from 22,012.7 to 24,057.3, a gain of 2,045 points (up 9.3%).

Overall, the S&P BSE SENSEX is up 12.1% over the year.

(To know more, check out historical annual results for HERO MOTOCORP and quarterly results for HERO MOTOCORP)

Read: Latest Annual Report Analysis of HERO MOTOCORP