Hero MotoCorp Shares Fall 3.5%pc on Q4 Earnings

Shares in Hero MotoCorp, India’s largest two-wheeler maker, fell nearly 3.7 per cent in early trade on Thursday after its net profit declined for the fifth time in last seven quarters.
But its results were above the estimates of many brokerages, leading to the stock recovering some of its early losses.
Hero MotoCorp reported a 3.5 per cent year-on-year drop in its net profit at Rs. 554 crore on tepid revenue growth amid an economic downturn. Its revenue grew 6 per cent y-o-y to Rs. 6,513 crore compared to Rs. 6,145 crore last fiscal.
Its adjusted ebitda (earnings before interest tax depreciation and amortisation) came in at Rs. 690 crore, down 20 basis points at 10.7 per cent.
Its Q4 numbers were however above the estimates of some brokerages. Nomura in a report said Hero MotoCorp’s Q4 net profit was 12 per cent above its estimates.
Gross margin of Hero MotoCorp which came in at 13.7 per cent was also above Nomura’s expectation of 13.2 per cent. Nomura says this margin expansion was mainly led by lower-than-expected raw material cost which decreased 80 basis points to 71.9 per cent of revenue as compared to its estimates of 72.9 per cent.
Surjit Arora of Prabhudas Lilladher says Hero MotoCorp’s net profit and ebitda margin were above its estimates. “Despite excise cut given to dealers during the quarter, their margins are commendable in my view,” he said.