Hero Honda rises after closing down over 5% on Wednesday
Hero Honda Motors made a comeback today and was trading up by 2.15% at 1555.75 on BSE in afternoon trade.
By ET Bureau |
MUMBAI: Hero Honda Motors made a comeback today and was trading up by 2.15% at 1555.75 on BSE in afternoon trade. The company's scrip had gone down by 5.27 per cent at the close of yesterday's trading on disappointing quarterly results.
Hero Honda Motors posted a third consecutive drop in quarterly net profit as mounting raw material costs and a one-time expense eroded gains from record motorcycle sales.
Net profit declined 20% to Rs 429 crore during the third quarter ended December 31 from Rs 535 crore in the same period last year, the world’s largest two-wheeler maker by volumes said.
The latest drop in quarterly profit comes after a 15% and 1.6% decline in the second and first quarters, respectively.
Net sales rose 34% to Rs 5,161 crore, boosted mainly by a 28% jump in two-wheeler sales during the third quarter in the world’s largest market for two-wheelers after China.
“For the past few quarters, the industry has faced a multitude of issues with constraints in supply of components and rising input costs,” said Hero Honda Managing Director Pawan Munjal. The two-wheeler maker’s quarterly results were much below analysts’ expectations.
“Profits are much lower even if we take into account the high raw material cost and extraordinary expenditure. We do expect revenue growth to be on track and the company could post 13-14% growth in volumes on an annual basis, but its profit margins would continue to be under pressure due to rising commodity prices and marketing expenditure on the upcoming cricket world cup,” said Mahaatesh Sabarad, analyst at Mumbai-based Fortune Equity.
The producer of bikes such as Splendor and Passion spent Rs 3,749 crore during the quarter to purchase steel, aluminium and other intermediates, a 43.5% rise from a year earlier.
“While we expect the market demand for two-wheelers to remain bullish and we are confident of carrying on our growth trajectory, we do foresee margins to remain under pressure in the short term,” Munjal added. The company incurred a one-time marketing expense of Rs 38 crore for the Commonwealth Games.
Hero Honda has a capacity to produce 5.4 million two-wheelers a year. Munjal says the company is on the verge of finalising the location for the fourth plant.
Hero Honda Motors posted a third consecutive drop in quarterly net profit as mounting raw material costs and a one-time expense eroded gains from record motorcycle sales.
Net profit declined 20% to Rs 429 crore during the third quarter ended December 31 from Rs 535 crore in the same period last year, the world’s largest two-wheeler maker by volumes said.
The latest drop in quarterly profit comes after a 15% and 1.6% decline in the second and first quarters, respectively.
Net sales rose 34% to Rs 5,161 crore, boosted mainly by a 28% jump in two-wheeler sales during the third quarter in the world’s largest market for two-wheelers after China.
“For the past few quarters, the industry has faced a multitude of issues with constraints in supply of components and rising input costs,” said Hero Honda Managing Director Pawan Munjal. The two-wheeler maker’s quarterly results were much below analysts’ expectations.
ADVERTISEMENT
Input costs rise 43.5% “Profits are much lower even if we take into account the high raw material cost and extraordinary expenditure. We do expect revenue growth to be on track and the company could post 13-14% growth in volumes on an annual basis, but its profit margins would continue to be under pressure due to rising commodity prices and marketing expenditure on the upcoming cricket world cup,” said Mahaatesh Sabarad, analyst at Mumbai-based Fortune Equity.
The producer of bikes such as Splendor and Passion spent Rs 3,749 crore during the quarter to purchase steel, aluminium and other intermediates, a 43.5% rise from a year earlier.
“While we expect the market demand for two-wheelers to remain bullish and we are confident of carrying on our growth trajectory, we do foresee margins to remain under pressure in the short term,” Munjal added. The company incurred a one-time marketing expense of Rs 38 crore for the Commonwealth Games.
ADVERTISEMENT
Chief Financial Officer Ravi Sud said the company has earmarked Rs18 crore for National Calamity Contingency Duty on sales of motorcycles from its two plants in Gurgaon and Daruhera in Haryana. Hero Honda has a capacity to produce 5.4 million two-wheelers a year. Munjal says the company is on the verge of finalising the location for the fourth plant.
ADVERTISEMENT
“Going forward, the company would have to change its product mix and concentrate more on higher profit generating premium bikes in the 150cc and above segment to keep its profits intact,” said an analyst with HSBC Securities. Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
