Stock Fundamentals

Hero MotoCorp: Cost comfort

Parvatha Vardhini C | Updated on January 12, 2018


Despite a 12.8 per cent fall in volume growth in the December 2016 quarter, Hero MotoCorp posted only about 2.6 per cent drop in net profit to ₹772 crore. While the 11.8 per cent dip in income from operations to ₹6,898 crore mirrored the lacklustre volume show, lower input prices and cost control efforts helped shore up the operating performance. Raw material costs as a percentage of sales stood at 62 per cent versus 64 per cent in the same period last year. Operating margin was 17.3 per cent, about 140 basis points higher than a year ago. Besides, a 46 per cent rise in other income and flat tax expenses gave net profit a boost. While the cash crunch continued to affect sales volumes in January, the impact of demonetisation is expected to wean off, going forward. But margins may come under pressure from the lag effect of the rise in raw material prices seen in the last few months.

Published on February 12, 2017

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