Hero MotoCorp Q2 Results Preview: Net profit likely to jump 35% to ₹967 crore; revenue seen up 2% YoY
Hero MotoCorp, the world’s largest two-wheeler manufacturer, will report its financial results for the quarter ended September 2023 today. The company is expected to see double digit growth in net profit, while revenue is seen rising moderately.
Despite strong urban demand and adequate finance availability, volume performance of two-wheeler companies in Q2FY24 has been restricted due to the timing of the festive season.
Hero MotoCorp’s total volumes during the July-September quarter of FY24 decreased 0.8% to 14,16,526 units from 14,28,168 units in the corresponding quarter of previous fiscal. The drop in volumes was offset by average selling price (ASP) growth of around 3% YoY.
Also Read: Bajaj Auto sales jumped 19% to 471,188 units in Oct 2023
The company’s net profit in Q2FY24 is expected to rise 35% to ₹967 crore from ₹716.1 crore in Q2FY23, as per average estimates of six brokerage firms. The net profit growth is likely to be driven by higher selling prices and easing commodity costs.
Hero MotoCorp’s revenue is expected to rise moderately by 2% to ₹9,257 crore from ₹9,075.4 crore, YoY. While its motorcycle sales are down 2% YoY in Q2, scooter sales are up 14% YoY. The company’s entry level mix has declined QoQ by almost 500 bps.
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The company’s earnings before interest, tax, depreciation and amortization (EBITDA) during the quarter is expected to rise 28% to ₹1,329 crore from ₹1,038.3 crore, YoY. EBITDA margin is estimated to expand by 290 basis points (bps) to 14.35% from 11.44%, YoY, higher due to lower input cost.
Kotak Institutional Equities expects Hero MotoCorp to see Q2FY24 net profit rising 43.5% to ₹1,027.5 crore from ₹716.1 crore, YoY. Revenues are estimated to increase by 4% YoY led by 5% YoY increase in average selling price (ASP) due to price increases and 1% YoY decline in volumes due to the continued weakness in entry-level motorcycle segment demand.
“We expect EBITDA margin to improve by 50 bps QoQ, mainly driven by marginal increase in gross margins due to raw material correction, price increases taken by the company, partly offset by an increase in losses in the EV segment due to price cuts and higher advertisement spends on account of newer launches,” Kotak Institutional Equities said.
Also Read: Tata Steel Q2 Results Preview: Net profit may fall sharply dragged by European operations; revenue seen down 6% YoY
Nuvama Institutional Equities said the company’s revenue growth YoY would be driven by better realizations, despite a drop in volumes, while EBITDA margin expansion YoY to be driven by better net pricing and JPY depreciation benefits.
The company’s demand outlook and product launch timeline would be key things to watch out for in the Q2 results.
Going ahead, the festive season is the next major catalyst for the automobile industry, while the expectations are high and initial trends for regional festive periods have shown positive momentum, a lot depends on the one-month festive period which starts from mid-October, analysts said.
At 12:15 pm, Hero MotoCorp shares were trading 0.18% higher at ₹3,096.05 apiece on the BSE.
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Updated: 01 Nov 2023, 12:17 PM IST