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BL Research Bureau

The second quarter sales of Hero Honda showed subdued growth of five per cent on a year-on-year basis while the profits declined marginally by around six per cent for the same period. However, going by monthly vehicle sales figures, the company appears to have handled the effect of rising interest rates in the current year better than peers.

Between Bajaj Auto and Hero Honda, the latter seems to have weathered the current slowdown better. In the entry segment, Hero Honda cumulative sales numbers for the six months ended September 2007 almost matched its April-September 2006 numbers, while a similar comparison reveals that Bajaj Auto sold 43 per cent lesser.

In the 125-250 cc segment, Bajaj’s sales remained mute, while Hero Honda’s was up 183 per cent. Hero Honda’s strong show in the wake of a slowdown can be attributed to a series of new launches (model variants) across all segments — entry, deluxe and premium.

Margins have remained under pressure in the past few quarters due to increasing input costs. Firm steel prices and discounts to perk up sales in the festival season (October-December quarter) pose the risk of sedate margins in the near-term.

These discount offers will have a greater impact on Hero Honda than Bajaj Auto as higher discounts may be required at the entry level segment where the former has a strong foothold.

However, the company’s recent launches in the premium segment targeted at the urban youth like CBZ Extreme, Karizma, Achiever, and Hunk may provide some cushion to the margins.

More Stories on : Stocks | Outlook | Two/Three Wheelers | Hero Honda Motors Ltd

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