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Hero MotoCorp has posted a 10 per cent growth in net profit for the first quarter ended June 30, 2012.
Apart from recording the highest-ever quarterly volumes — a seven per cent rise (1.64 million units) — in bike and scooter sales in the period, the company also attributed the higher profits to an 11 per cent (Rs 104 crore) rise in other income.
The effective tax rate also fell to 16.25 per cent from 19.19 per cent in the comparable period last fiscal, company officials said in the investor call.
Net sales for the two-wheeler market leader also went up 10 per cent in the quarter.
Monsoon effect
However, Hero MotoCorp shares on the BSE dipped 1.37 per cent to Rs 2,087.50 on Thursday due to the company’s performance fell below analysts’ estimates, media reports said.
While warning that the performance in the remaining quarters would depend on a good monsoon, Mr Pawan Munjal, MD & CEO, said that the two-wheeler industry growth has slowed down over the past couple of months to single digits.
“We have so far seen only a patchy monsoon, and this might reflect on retail sales in rural and upcountry markets in the coming months,” he said.
Impact margin
He added, “Currency volatility is also a point of concern and the rupee depreciation is likely to impact our margins”.
Hero MotoCorp's EBITDA margin for the period stood at 15 per cent higher than the 14.3 per cent posted in the same period last year.
Mr Anil Dua, Senior Vice-President for Marketing & Sales, said that the two-wheeler industry is not likely to grow beyond 10 per cent this year.
“We have seen some moderation in our scooter sales, because of some sort of cannibalisation between Maestro and Pleasure.
“We are increasing dispatches anticipating strong demand during the festival period. The inventory levels have gone up from two weeks to four weeks,” he said.
Exports, expansion
Hero MotoCorp expects to start exports to Latin America and Africa in this calendar year. It is also investing Rs 2,500 crore in setting up its fourth and fifth plants (in Rajasthan and Gujarat), expanding capacity at existing plants (Haridwar, Gurgaon and Dharuhera) and in building an integrated R&D centre in Rajasthan.
With this expansion, the company’s total installed capacity would touch more than nine million units in two years’ time – which is in line with the stated objective of reaching 10 million units in the next five years.
All its models will also switch over to the Hero MotoCorp brand name from ‘Hero Honda’ within this fiscal.
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