Hero Moto hits a bump

Hero Motocorp seems to have hit a bump. The monthly sales numbers for May’15 are not very encouraging. Though its sales were up over 5 lakh units per month, down 5% (YoY) at 5,69,876 units. Slowing rural economy and moderating wages in the rural market have affected the sales. Sequentially though, there has been an improvement – in April’15, it sold 5,33,305 units – up 7%.

But the fact remains that two-wheeler sales are being affected by unseasonal rains witnessed in the month of March. Poor crop realization and a slowdown in rural wages have pulled back the rural economy, impacting retail off-takes in markets such as Bihar, Madhya Pradesh and sugarcane growing areas of Uttar Pradesh and Maharashtra.

The stock is not doing too well on the bourses today; currently down over 2.5% at Rs.2634, closer to its intra day of Rs.2631 rather than the intra day high point of Rs.2700. Volumes are pretty muted at 14,000 shares v/s 2W average of 23,000 shares.

As such the company had not ended Q4FY15 on a good road. It had ended the quarter with a 14% (YoY) drop in net profit at Rs 476.53 crore mainly due to a one-time impairment payment - Rs 155 crore (USD 25 million) of equity investment in Erik Buell Racing, Inc. Net sales during the quarter rose 4% at Rs.6794 crore.