Hero Moto accelerates

Hero Moto is currently the top gainer on the BSE, the stock up over 4% at Rs.1830.90, with an intra day high at Rs.1840.45. Volumes are huge at 1.14 lakh shares being traded today morning compared to two week average volume of 21,000 shares.

The stock is up after the company posted a a much improved operating margin, which QoQ rose by 100 bps at 14.8%. This improvement can be attributed directly to the 10% decline in other expenditure.

Apart from this, the overall performance was on a decline. The company, for Q1FY14, posted a 11% (YoY) drop in net profit at Rs.548 crore. The company has blamed this on higher tax, which for the quarter jumped up 69% at Rs.201 crore. This higher tax outgo was on account of expiry of 5-year tax benefit for its Haridwar plant. There was also the effect of  10% surcharge introduced in Budget FY14. This increased the tax outgo of the company by 3%.  But that alone cannot be the reason. Demand itself was muted which is reflected in the net sales, which is down 1.30% at Rs 6,127 crore. EBIDTA slipped 2.3% from Rs.936 crore to Rs.915 crore.