Hero MotoCorp revenue increases by 6.6 per cent as sales volume grows

Hero MotoCorp (HMCL) India’s largest two wheeler maker announced its third quarter results on Thursday.  The topline increased by 6.6 per cent owing to increase in volume.

On financial front, the consolidated net revenue from operations of HMCL reached to Rs 7295 crores in Q3FY16 compared to Rs 6839 crores in Q3FY15, an increase of 6.66 per cent year on year (YoY). The EBITDA stands at Rs 1140 crores this quarter compared to Rs 822 crores in Q3FY15, an increase of 38.71 per cent YoY. The EBITDA margin of company stands at 15.63 per cent this quarter compared to 12 per cent in Q3FY15. The net profit stands at Rs 796 crores in Q3FY16 compared to Rs 583 crores in Q3FY15, an increase of 36.51 per cent YoY. 

Higher revenues were on account of a 2.53 per cent increase in volumes and a three per cent growth in realisations attributed to price increases made effective in the last few months. Volume wise the company sold a total of 16,90,354 units vehicles in Q3. While topline growth helped, operating profit margins were boosted by lower raw material costs, as well as on account of the cost reduction programme undertaken by the company. 

The nine month ending consolidated net revenue from operations increased by 1.42 per cent and reached to Rs 21087 crores compared to Rs 20791 crores for the same period last year. The net profit for nine month period stands at Rs 2318 crores compared to Rs 1909 crores, an increase of 21.42 per cent from the same period last year. Volume wise the company sold a total of 49,11,082 vehicles in April-December 2015 period, a decrease of 2.87 per cent compared to same period last year.

The domestic two wheeler market continues to be sluggish. HMCL management expects sentiment to remain subdued for the next couple of quarters. Demand in rural markets has been severely impacted due to two consecutive sub-normal monsoons. The company can see a positive turn-around towards the second half of next fiscal if we have a good monsoon, and sentiments change in rural market. 

On valuation front the trailing twelve month (TTM) P/E of HMCL is 19.47 as compared to industry P/E of 23.43. The stock of company is currently trading at Rs 2520, an increase of 0.86 per cent from previous close.