Hero MotoCorp Q1 FY24 PAT up 32% at Rs 825 crore, revenue up 4.5% at Rs 8,767 crore

Hero MotoCorp Q1 FY24 PAT up 32% at Rs 825 crore, revenue up 4.5% at Rs 8,767 crore

Hero MotoCorp Ltd announced a notable 32 percent year-on-year (YoY) increase in its standalone net profit for the first quarter, reaching Rs 825 crore compared to Rs 624.52 crore in the same period the previous year. This growth was attributed to factors such as higher prices, enhanced operating performance, and benefits from inventory adjustments.

The company’s revenue also witnessed a positive trajectory, marking a 4.5 percent YoY rise to Rs 8,767.27 crore in Q1FY24 from Rs 8,392.54 crore in the corresponding period of the previous year.

The improved financial performance was facilitated by a combination of factors, including lower commodity costs, strategic price adjustments, positive operating leverage, and an enriched product mix.

Niranjan Gupta, Chief Executive Officer of Hero MotoCorp, emphasized the recovery in their internal combustion engine (ICE) business margins to pre-Covid levels. This achievement provides them with the necessary impetus for growth as they look ahead. Gupta articulated a clear focus on growth and market share as the company’s primary objectives moving forward.

Hero MotoCorp’s performance underscores its resilience and adaptability in navigating dynamic market conditions. By capitalizing on a range of strategies and leveraging favorable factors, the company is well-positioned to continue its growth trajectory while aiming to expand its market presence.

Despite a decline in volumes, the largest two-wheeler manufacturer in the country, Hero MotoCorp, reported strong financial performance. The company’s total sales, including exports, saw a 3 percent dip, totaling 13.53 lakh units during the April to June period compared to 13.90 lakh units in the corresponding period of the previous year. While domestic sales experienced a marginal 0.8 percent YoY decline, exports faced a significant setback with a 43 percent drop.

Notably, Hero MotoCorp has embarked on enhancing its presence in the premium segment, with positive indicators seen in the pre-booking numbers for the Harley Davidson X440. The company is poised to introduce several new models in this premium category over the upcoming quarters, aiming to establish a substantial presence. Additionally, Hero MotoCorp’s efforts in the electric vehicle (EV) sector are gaining traction as it progresses toward its goal of expanding coverage to 100 cities by December of this year.

Niranjan Gupta, CEO of Hero MotoCorp, emphasized the company’s commitment to both the premium segment and the EV market. These strategic moves reflect Hero MotoCorp’s proactive approach to diversification and expansion, which positions the company to capture new growth opportunities and further solidify its market position.

Hero MotoCorp achieved noteworthy financial results in Q1FY24, with its earnings before interest, taxes, depreciation, and amortization (EBITDA) reaching Rs 1,206 crore, marking an impressive 28 percent increase.

This growth was propelled by a combination of factors, including the easing of commodity costs, accelerated savings initiatives, and strategic adjustments in pricing. As a result, the EBITDA margin for the quarter reached 13.8 percent, reflecting a substantial improvement of 250 basis points (bps). Notably, the underlying EBITDA margin for the internal combustion engine (ICE) business reached 14.5 percent, excluding the impact of the electric vehicle (EV) business.

These financial achievements underscore Hero MotoCorp’s adeptness at managing costs, optimizing operations, and making strategic decisions. The improved EBITDA and margins reflect the company’s ability to navigate dynamic market conditions while maximizing profitability. By focusing on various operational aspects, Hero MotoCorp is well-positioned to continue its growth trajectory and enhance its market competitiveness.

The EBITDA margin serves as an indicator of a company’s operating profit in relation to its revenue. Hero MotoCorp’s Profit Before Tax and exceptional items for the quarter reached Rs 1,255 crore, marking an impressive 52 percent growth compared to the previous quarter’s figure of Rs 824 crore. The company’s consolidated revenue from operations amounted to Rs 8,851 crore, indicating a 5 percent growth over the previous year. Meanwhile, the Profit After Tax (PAT) reached Rs 701 crore, reflecting a 20 percent growth over the previous year.

Analysts at Kotak Institutional Equities attribute the decline in sales volumes to ongoing weakness in the demand for entry-level motorcycles. This suggests that the company’s performance was influenced by prevailing market dynamics, including consumer preferences and economic conditions, which had an impact on the demand for specific motorcycle segments.

Despite these challenges, Hero MotoCorp’s notable growth in Profit Before Tax and exceptional items, along with its increased revenue and PAT, highlight the company’s ability to effectively manage its operations and make strategic decisions. By focusing on various aspects of its business, Hero MotoCorp continues to navigate the complexities of the market while striving for sustainable growth and profitability.

Hero MotoCorp’s Q1FY24 results aligned with analysts’ forecasts. A poll conducted among five brokerages anticipated a 26 percent year-on-year (YoY) rise in the company’s net profit for the first quarter of the fiscal year, reaching Rs 786 crore. Similarly, revenue from operations was projected to grow by 4.5 percent, totaling Rs 8,754 crore.

The analysts had predicted a 3 percent YoY decrease in total vehicle sales, but they also anticipated a 7 percent increase in sales compared to the previous quarter. In contrast, exports were expected to decline by 43 percent compared to the corresponding quarter of the previous fiscal year.

These forecasts and expectations underscore the thorough analysis and insights provided by industry experts. Despite the anticipated challenges in terms of total vehicle sales and exports, Hero MotoCorp’s ability to meet analysts’ projections demonstrates the company’s resilience and its proactive strategies to navigate through the evolving market conditions.

In recent earnings estimates provided by Nirmal Bang, it was anticipated that Hero MotoCorp would report a net profit of Rs 775 crore, reflecting a 23.6 percent YoY increase (and a 9 percent rise quarter on quarter). Additionally, the brokerage predicted that net sales would grow by 9.8 percent YoY (with a 1.5 percent increase QoQ), reaching Rs 8,150.7 crore.

Nirmal Bang’s projections also suggested that EBITDA was likely to experience an 18.8 percent YoY growth (and a 6.4 percent rise QoQ), amounting to Rs 983.3 crore.

On August 10, the share price of Hero MotoCorp experienced a decline of 0.91 percent, reaching Rs 3,029.35 on the Bombay Stock Exchange (BSE). This movement in share price reflects the response of the market to various factors, including company performance, industry trends, and broader market dynamics.

The close alignment of Nirmal Bang’s earnings estimates with Hero MotoCorp’s actual financial results underscores the accuracy and insightfulness of their analysis. This level of precision in forecasting demonstrates Nirmal Bang’s ability to provide valuable insights to investors and stakeholders in the financial markets.

Hero MotoCorp is optimistic about the upcoming quarters, anticipating a buildup of momentum driven by favorable economic indicators and positive consumer sentiments. The company’s strategy includes a series of new product launches scheduled for this year, alongside an increased focus on the premium segment.

According to Hero MotoCorp, various positive factors are contributing to this optimistic outlook. The company cites “favourable economic indicators” and “positive consumer sentiments” as key drivers for potential growth. A normal monsoon is expected to bode well for demand, particularly as the festive season approaches. Additionally, the company anticipates reduced inflationary pressures, which could translate into increased spending power for consumers.

Niranjan Gupta, CEO of Hero MotoCorp, emphasized the positive scenario for demand, particularly in the second half of the year and beyond. The convergence of these factors indicates a promising outlook for the company, reflecting its strategic positioning and ability to capitalize on emerging opportunities.

As Hero MotoCorp continues to expand its product portfolio and strengthen its presence in the premium segment, the company is well-poised to leverage these favorable conditions and enhance its market position in the coming quarters.