Hero Motocorp, the erstwhile Hero Honda, posted robust 43% growth in net profit to Rs 613.03 crore on account of highest quarterly sales enabling notable operating performance and nil EO expense though partially constrained by amortized license fee. However net profit was a tad below market expectation
The topline grew by 17% to Rs 6031.45 crore on back of highest quarterly sales volume and 5% increase in net sales realizations. The operating profit margin (OPM) grew by whopping 450 bps on healthy sales resulting in impressive 64% growth in operating profit to Rs 942.99 crore.
According to Mr. Pawan Munjal, Managing Director & Chief Executive Officer, Hero MotoCorp Ltd, said, It is heartening to see that our sales have been in excess of half a million two wheelers in every month of the quarter, thus further strengthening our leadership. We are well in line to meet our guidance for over six million unit sales in the fiscal 2012.
In FY12 the industry has been facing constraints of rising fuel prices, high interest rates and sharp rupee depreciation, leading to increased input costs impacting the margin. We have also seen a softening in commodity prices of late, which has, however, been offset by the rupee depreciation. Therefore, while we expect market demand for two-wheelers to remain stable, a lot will depend on the overall economic and political scenario going forward. he added.
Quarter Performance
Aided by highest quarterly sales volume and 5% increase in net realizations, Hero Honda posted 17% growth in topline to Rs 6031.45 crore. Apparently, it is the highest quarterly operating income earned by the company so far. In midst of negative macro issues such as rising interest rates and petrol prices coupled with inflation, the company has managed to achieve growth of 11% in sales volume to 1.58 million vehicles in Dec 2011 quarter that too aided by interest rate sensitive entry level motorcycles that constitute over 85% of total sales. This is attributed primarily to its wide distribution net work including its reach to rural market that now contributes 45% to its total sales volume. The sales in rural market are cash driven and thus are unaffected by interest rate mayhem.
Highest quarterly sales and fall in other expenditure enabled whopping 450 bps spike in OPM to 15.6%. Thus the operating profit grew by impressive 64% to Rs 942.99 crore. Raw material costs, as % to sales net stock adjusted, fell by 40 bps to 73%. Also the other expenditure declined by 400 bps to 8%. Only the staff cost grew by 20 bps to 3%.
The PBT before EO grew by limited 23% to Rs 723.80 crore primarily constrained by significant hike in depreciation costs as it includes amortization of license fee of Rs 177.10 crore. The depreciation cost surged by whopping 434% to Rs 298.65 crore. Also the interest income fell by 39% to Rs 3.18 crore. The other income grew by moderate 23% to Rs 76.28 crore. However PBT after EO surged by robust 42% to Rs 723.80 crore on account of EO expense accounted for in Dec 2010 quarter against none in Dec 2011 quarter. Further 30 bps fall in effective tax rate lifted the net profit by robust 43% to Rs 613.03 crore.
Nine Month Performance
In nine month ended Dec 2011, the operating income grew by healthy 25% to Rs 17544.10 crore aided by 18% growth in sales volume to 4.66 million vehicles and 6% growth in net sales realizations. Improved sales volume enabled 260 bps hike in OPM to 15.4% thus the operating profit grew by robust 51% to Rs 2694.12 crore. The PBT after EO grew by 21% to Rs 2117.83 crore largely moderated by significant spike in depreciation cost on account of amortized license fee though nil EO expense (against EO expenses of Rs 79.84 crore in nine month ended Dec 2010) minimized the impact. The net profit settled with 24% growth to Rs 1774.54 crore boosted by whopping 210 bps fall in effective tax rate.
- At recent Auto Expo held in January 2012, the company unveiled new two wheelers - new 110cc Passion X Pro, Maestro - 110cc scooter and 125cc motorcycle - Ignitor. These would be launched in Indian market in next few months.
- The promoter's % of share holding remained unchanged at 52.21% as on 31st Dec 2011. The promoters' have pledged 1.61% of shares of the company as on Dec 2011.
The scrip is currently trading at Rs 1900.75.
Hero Motocorp: Result
| Particulars | 1112(3) | 1012(3) | Var (%) | 1112(9) | 1012(9) | Var (%) | 1103(12) | 1003(12) | Var (%) |
| Total Net Operating income | 6031.45 | 5161.66 | 17 | 17544.10 | 14010.22 | 25 | 19401.15 | 15860.51 | 22 |
| OPM (%) | 15.6 | 11.2 | | 15.4 | 12.8 | | 13.5 | 17.4 | |
| OP | 942.99 | 576.58 | 64 | 2694.12 | 1787.06 | 51 | 2616.99 | 2766.95 | -5 |
| Other Income | 76.28 | 62.03 | 23 | 244.44 | 193.80 | 26 | 268.14 | 235.63 | 14 |
| PBDIT | 1019.27 | 638.61 | 60 | 2938.56 | 1980.86 | 48 | 2885.13 | 3002.58 | -4 |
| Interest | -3.18 | -5.22 | -39 | 3.80 | -9.95 | LP | -1.85 | -20.62 | -91 |
| PBDT | 1022.45 | 643.83 | 59 | 2934.76 | 1990.81 | 47 | 2886.98 | 3023.20 | -5 |
| Depreciation / Amortization | 298.65 | 55.96 | 434 | 816.93 | 164.99 | 395 | 402.38 | 191.47 | 110 |
| PBT | 723.80 | 587.87 | 23 | 2117.83 | 1825.82 | 16 | 2484.60 | 2831.73 | -12 |
| EO | 0.00 | -79.84 | -100 | 0.00 | -79.84 | -100 | -79.84 | 0.00 | -100 |
| PBT After EO | 723.80 | 508.03 | 42 | 2117.83 | 1745.98 | 21 | 2404.76 | 2831.73 | -15 |
| Tax^ | 110.77 | 79.03 | 40 | 343.29 | 319.69 | 7 | 476.86 | 599.90 | -21 |
| PAT Before EO | 613.03 | 429.00 | 43 | 1774.54 | 1426.29 | 24 | 1927.90 | 2231.83 | -14 |
| EO expense | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 |
| Net profit | 613.03 | 429.00 | 43 | 1774.54 | 1426.29 | 24 | 1927.90 | 2231.83 | -14 |
| EPS * | 122.8 | 99.4 | | 118.5 | 99.6 | | 99.7 | 111.8 | |
* Annualized on current equity of Rs 39.94 crore. Face Value: Rs 2
^ Tax includes provision for Income tax and fringe benefit tax
Var. (%) exceeding 999 has been truncated to 999
LP: Loss to Profit PL: Profit to Loss
EO: Extraordinary items
EPS is calculated after excluding EO and relevant tax
Figures in Rs crore
Source: Capitaline Corporate Database |