Hero Moto

Hero Motocorp was the top gainer on the BSE after the company posted a better-than-expected set of numbers for Q4FY13. Though everyone had largely expected a decline for the third consecutive quarter, the decline was not as steep as estimated – net profit at Rs.574 crore, down 5% (YoY). Increasing competition, lower volumes and poor demand offtake, all together pulled down the profits. There was a 2.8% fall in volumes and this was amply reflected in the net sales, which (YoY) was up by a meager 2% at Rs.6145 crore. The company sold 15.27 lakh two-wheelers in Q4 v/s 15.72 lakh units in previous Q4.EBITDA fell by 150 bps at 13.8%.

For FY13, the company posted a 11% fall in net profit at Rs.2118 crore while its EBIDTA slipped 160 bps to 13.9%. Its overall market shares fell 240 bps to 42.85% and most of this was eaten away by its earlier partner, Honda. The company continues to maintain a cautious outlook for the future and has stated that times remain tough for the sector. Once the interest rate cycle starts coming down, maybe we could see a spike up in demand.

The market is more enthused due to two factors –a  very generous dividend of 3000% or Rs.60 per share on Rs.2 face value share for FY13 and secondly, to improve margins, it has already announced a price hike of Rs.500 to Rs.1500 across all models and with immediate effect. The company has lined up plans to combat competition and improve margins. In current fiscal, the company plans to have more new launches, meaning aggressive marketing campaigns and also capacity additions and network expansions. It plans to give more impetus to exports and in that direction, commenced dispatches to around 6-7 new markets in FY13 to which it plans to add more in current fiscal.