Hero MotoCorp net climbs 10 per cent

MUMBAI: Hero MotoCorp registered a 10% growth in net sales for the first quarter of the current fiscal as against the same quarter of last year, broadly in line with analyst estimates.

The company's net profit also shot up by more than 10% compared to the corresponding quarter in the previous year.

The company has sold more than 16 lakh units in the June 2012 quarter, its largest quarterly sales till date, on the back of two consecutive months of highest-ever monthly sales in April and May this year. The demand for two-wheelers has slowed down from over 18% a couple of years ago to just about 9% today.

Net profit for the period stood at 615.46 crore and the company recorded an EBIDTA margin of 15%. Underlining his concern on a demand slowdown in coming months, Pawan Munjal, MD & CEO, Hero MotoCorp said: "Going forward, a lot will depend on a good monsoon and the consequent harvest to get the buyers to exercise their decision to purchase two-wheelers." His concerns on slowing demand are further fuelled by current macro-economic concerns. "Currency volatility is also a point of concern and rupee depreciation can impact our margins," he said.

The company has, in the current quarter, clocked operating margins of 15% - a rise of about 40 basis points since the corresponding period in the previous year. However, in light of the rupee depreciation and a slowing demand, these margins could be under pressure in the coming quarters. Taking this into consideration, Hero MotoCorp plans to launch new models, especially in the deluxe 100cc and 125cc segments. Its recent launch - a 125cc Hero Ignitor- has already strengthened its current portfolio in this segment that also includes Hero Glamour and Hero Super Splendor.

The company also plans to increase its operating capacity in the next couple of years and has already planned a capex of over 2,500 crore in setting up new plants in Rajasthan and Gujarat.