Financial Daily from THE HINDU group of publications
Thursday, Jan 15, 2004
Financial Daily from THE HINDU group of publications Thursday, Jan 15, 2004 |
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Corporate
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Performance Columns - Microscope New models spruce up Hero Honda margins B. Krishnakumar
MOTORCYCLE major - Hero Honda has recorded a 33 per cent improvement in post-tax earnings for the quarter ended December 2003. The turnover during this period increased by about 15 per cent to Rs 1,581.4 crore. Much of the improvement in performance is explained by the success of the latest model launches — Splendor+ and Passion Plus and the entry-level model - CD Dawn. Aided by the success of these models, Hero Honda has managed to post a 27 per cent rise in motorcycle sales volume. The divergence in the growth in volume and turnover reflects that the company's lower end model - CD Dawn has accounted for major part of sales volume. Similar to the trend in the past, the company has managed to record a higher operating profit margin aided by persistent thrust towards cost control. The operating profit margin increased to 17.1 per cent from 16.6 per cent recorded in the third quarter of the previous fiscal. The post-tax earnings have increased by 33 per cent to Rs 202.7 crore. However, a significant chunk of the growth in post-tax earnings is explained by increase in income from other sources. The company appears to have cashed in on the recent stock market boom by booking profits on its investment portfolio. As result, the income from other sources has more than doubled to Rs 44.48 crore from Rs 21.78 crore. But for the spurt in other income, the company would have had to contend with relatively modest bottomline growth of 18 per cent. Going forward, the demand for motorcycles is likely to remain robust. Any realignment in product mix in favour of higher value products could also have a significant positive impact on performance. The growing success of higher value models - Splendor+ and Passion Plus - could have an inflationary impact on profitability. Considering that the recent growth is fuelled by new launches, there is scope for increased indigenisation. This in turn would add to profitability and performance.
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