Hero Moto

The company disappointed the market with  a set of not-so-good numbers. For Q2Fy13, the company declared a 27% (YoY) decline in net profit at Rs.440.5 crore and QoQ, it was down 28%.  Trouble began right with the topline, which sequentially, fell 17% at Rs.5151 crore.  The number of two wheelers sold during the quarter fell 19% (QoQ). The company managed to keep a tight leash on the operating costs, or else the bottomline would have slipped further.

The reason for the falling sale is rising competition and falling demand. The company has stated in the Press Release that the two-wheeler market in the country has been adversely impacted due to the overall market slowdown and prevailing sentiments since the beginning of the quarter. Sensing the slowdown in the market,  the company began adjusting its production plans in August and September, which was thus reflected in our quarterly sales figures.  Margins were down at 13.86%. The company has to now pin all its hopes on the festive demand picking up and it has refuted rumours of the sales going down due to the divorce with Honda. Once interest rates also come down, its sales could see a pick up. In H1Fy13, the company spent Rs.250 crore on capex and plans to spend Rs.350 crore in H2FY13. It is going ahead with plans to set up its 4th and 5th pant and will also increase capacities of existing plants. The monthly sales numbers will indicate whether the festival demand has ticked in or not. And that will give us cues for Q3.