Hero MotoCorp Ltd.’s quarterly profit fell as higher ownership cost hurt two-wheeler demand.
Net profit of India’s largest two-wheeler maker fell 17% sequentially to Rs 865 crore in the quarter ended March, according to an exchange filing. That, however, surpassed Rs 799-crore consensus estimate of analysts tracked by Bloomberg.
The Pawan Munjal-led company’s revenue fell 11% over the preceding three months to Rs 8,686 crore, against the Rs 8,416-crore forecast.
Key Highlights (QoQ)
Earnings before interest, tax, depreciation and amortisation fell 14% to Rs 1,211 crore.
Ebitda margin stood at 13.9% against 14.5%.
Hero MotoCorp said in the statement that while a late recovery towards the second half of the FY21 saw the company gain strong volumes, the broader market continues to suffer in view of the recent escalations in Covid-19 cases.
The New Delhi-based motorcycle maker sold 15% fewer units than the preceding quarter at 15.68 lakh in the January-March period. The decline came as demand in rural India, which was expected drive two-wheeler sales buoyed by a good monsoon, a bumper crop, increased government spending and less severe Covid-19 restrictions, failed to take off. Costly fuel, a series of price hikes prior to the pandemic and then again recently to counter the surge in commodity costs also caused sales to tumble.
Hero MotoCorp’s peer Bajaj Auto Ltd. also acknowledged the sharp increase in input costs in the fourth quarter, and expects it rise in the ongoing three-month period ending June. Bajaj Auto reported a fall in net profit and revenue over the preceding quarter.
BloombergQuint’s survey of dealers across the country indicates pressure on two-wheeler demand, which is causing a pile-up in inventory.
Hero MotoCorp has already extended the plant shutdown across its plant until May 9.
Niranjan Gupta, chief financial officer at Hero MotoCorp, said the firm is prepared to address any eventuality in order to stabilise its business in the remaining months of the quarter. He, however, expects normalcy to kick in from the second quarter.
“A healthy monsoon, harvest season and a rebound in GDP to aid the industry’s recovery from Q2 onwards,” he said, adding that it also expects significant growth in its global business, and aims to work on developing the key overseas markets.
Shares of Hero MotoCorp ended 4.67% higher before the results were announced compared with a 0.73% gain in the benchmark Nifty 50.