Hero Motocorp Shares Q3 Results

Let us look at the top line of Hero Motocorp first. For the Dec-21 quarter, the company reported -18.46% fall in sales at Rs.8,013 crore on a consolidated YoY basis. During the December 2021 quarter, Hero Motocorp recorded selling volumes of 12.92 lakh units of motorcycles and scooters combined. This is sharply lower on a YoY basis and the key reason for the same was weak rural demand. On a sequential basis, the revenues were down by -6.06% showing a clear loss of momentum in entry level two-wheeler sales. 

The one redeeming feature of the Hero Moto numbers were the sales of the global business which saw a growth of 16% YoY at 61,000 units. While there was substantial pressure on the overall sales of scooters and motorcycles, the parts business did relatively well with positive growth of 15% in sales at Rs.1,186 crore. During the quarter, Hero Moto deepened its investment in Ather Energy by Rs.150 Cr; taking its total investment in Ather to Rs.655 crore.

Let us not turn to the operating performance of Hero Moto for the third quarter. For the Dec-21 quarter, operating profits were down -18.46% at Rs.809 crore. During this period, the consolidated EBITDA stood at Rs.960 crore while the EBITDA margins came in sharply lower at 12.2%. This was largely responsible for the weak operating performance. However, Hero Moto did try to offset some of these risks by cost cutting and inventory tweaking.

However, the working capital efficiency gains could only partially compensate for the sharp spike in commodity prices in the quarter. The shortage of chips in the market also led to weak production numbers. As a result, the operating margins of Hero Motocorp tapered from 12.90% in Dec-20 quarter to 10.09% in Dec-21 quarter. At the same time, on a sequential basis, operating margins were roughly 59 bps lower on momentum pressures.

Finally, we come to the bottom line of Hero Moto. Clearly, the pressure of operations were visible in the bottom line too as the net profit for the Dec-21 quarter fell sharply by -30.95% YoY at Rs.703.74 crore. The pressure on the operating margins largely got transmitted to the bottom line too. PAT margins tapered from 10.37% in the Dec-20 quarter to 8.78% in Dec-21 quarter. However, PAT margins were higher by 5 bps on a sequential basis on lower base.