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Hero Motocorp (Q2 FY14)

During Q2 FY14, HMCL volumes witnessed 6.3% yoy increase. Realizations also grew 3.9% yoy on back of price hikes implemented through the year, better product mix and higher spare part sales.

January 01, 1970 5:30 IST | India Infoline News Service
CMP Rs2,084, Target Rs2,300, Upside 10.4%
 

  • Revenue growth was at 10.4% driven by 6.3% volume growth led by scooters, realizations were higher by 3.9% owing to better product mix with higher contribution from scooters and premium motorcycles along with jump in spare part revenues

  • Margins at 14.5% were lower than our expectations mainly owing to higher than estimated overheads

  • Tax rate was higher at 26.9%, on back of part reduction of tax benefit at Pantnagar and additional surcharge element introduced in the FY14 budget

  • Cost cutting initiatives to drive cost reduction of an estimated annualized rate of Rs15bn by FY18 

  • Upgrade to BUY with a revised 9-month price target of Rs2,300  

Result table
(Rs m)
 Q2 FY14
 Q2 FY13
 % yoy
 Q1 FY14
 % qoq
Volume
 1,416,211
 1,332,805
 6.3
 1,559,282
 (9.2)
Realisation
 40,433
 38,921
 3.9
 39,502
 2.4
Net sales
 57,262
 51,875
 10.4
 61,595
 (7.0)
Material costs
 (40,955)
 (37,702)
 8.6
 (44,556)
 (8.1)
Personnel costs
 (2,290)
 (1,922)
 19.2
 (2,215)
 3.4
Other overheads
 (5,690)
 (5,059)
 12.5
 (5,672)
 0.3
Operating profit
 8,327
 7,192
 15.8
 9,152
 (9.0)
OPM (%)
 14.5
 13.9
 68 bps
 14.9
 (32) bps
Depreciation
 (2,869)
 (2,895)
 (0.9)
 (2,744)
 4.6
Interest
 (30)
 (30)
 0.3
 (30)
 0.2
Other income
 1,155
 993
 16.2
 1,123
 2.9
PBT
 6,583
 5,261
 25.1
 7,501
 (12.2)
Tax
 (1,769)
 (855)
 106.9
 (2,016)
 (12.2)
Effective tax rate (%)
 26.9
 16.3
26.9
PAT
 4,814
 4,406
 9.3
 5,486
 (12.2)
PAT margin (%)
 8.4
 8.5
 (9) bps
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