Street does not seem Happy with Hero Q2 results

On Wednesday Hero MotoCorp Ltd posted a record net profit for the quarter ended 30 September (Q2FY17), as normal monsoon rains boosted consumer sentiment and demand in the run-up to the festive season pushed motorcycle sales at India’s largest two-wheeler maker.

Net profit went up 27.74% to Rs 1,004.22 crore in the quarter from Rs 786.12 crore in the corresponding quarter last financial year. Net sales increased to Rs. 8,448.74 crore from Rs 7,346.47 crore on the yearly basis.

Yesterday, Hero share price closed at the 2% rise.

Unit sales increased to 1.82 million during the quarter from 1.57 million a year-ago.

Higher demand in the run-up to the festive period cushioned the sales at the company, whose earnings before interest, tax, depreciation and amortisation (Ebitda) stretched to a record 16.20 %, from 14.91% a year ago, aided by soft commodity prices and cost controls. EBITDA is an indicator of operating profitability. The Q2 results were declared after market closed for trading on Wednesday.

Today, Hero share price opened 0.73% higher than its previous close.

Pawan Munjal, chairman, managing director and chief executive officer, Hero MotoCorp, stated that the September quarter numbers are a defining point in the journey of the company.

He also said that the highest-ever volume sales during the quarter are a replication of the overwhelming customer preference for Hero’s products, and a testimony to their market leadership.

He also added that the domestic market had seen revitalization in the past two quarters due to normal monsoon rainfall and positive consumer sentiment. The trend is likely to continue through the year and likely to result in double-digit growth for the industry.

Currently, at 9:25 AM Hero share price is trading at Rs. 3413 with the decline of 0.16%.

But there’s one concern for Hero and that is the pace at which rival Honda Motorcycle and Scooter India Pvt. Ltd (HMSI) is closing the space with the market leader. Between April and September this financial year, Hero sold 809,638 units more than Honda. In the same time in 2011-12, after the Delhi-based firm ended a 26-year joint venture with Honda, the difference was 1.8 million units.

Hero is the top 500 performing stock recommended by Dynamic Levels for the quarter. For the details on the stock, visit Hero share price history page of Dynamic Levels website.