What is your view on the third quarter results of Hero Motocorp?

Dec-21 was always going to be a tough quarter for Hero Moto with pressure on the top lien and the bottom line. There was the problem of weak demand and tepid rural sales. In addition, higher input costs and production disruptions meant hit operating profits in Q3. Hero did try to stem losses through efficiency enhancement and cost cutting, but it only helped up to a point. Here is a summary of Hero Motocorp numbers for Dec-21 quarter.

For Dec-21 quarter, Hero Moto reported -18.46% lower sales at Rs.8,013 crore. Quarterly volumes of motorcycles and scooters were lower at 12.92 lakh units. There was clear loss of momentum in entry level two-wheeler sales. However, the global business saw growth of 16% yoy at 61,000 units. Despite the overall pressure on two-wheelers, the parts business did relatively well with 15% growth traction in sales at Rs.1,186 crore. In Q3, Hero Moto enhanced its investment in Ather Energy by 30% to Rs655cr.

For the Dec-21 quarter, operating profits of Hero Moto were down -18.46% at Rs.809 crore. EBITDA for Q3 stood at Rs.960 crore and EBITDA margins lower at 12.2%. Hero Moto did try to offset some of the risks via cost cutting and inventory tweaking. Shortage of chips in the market was also an overhang in the quarter. Operating margins tapered from 12.90% in Dec-20 quarter to 10.09% in Dec-21 quarter. On a sequential basis, operating margins were just about 59 bps lower.

The operating profit and EBITDA pressures were transmitted to the bottom line. Net profits for the Dec-21 quarter fell by -30.95% yoy to Rs.703.74 crore. PAT margins tapered from 10.37% in the Dec-20 quarter to 8.78% in the Dec-21 quarter for Hero Motocorp. However, PAT margins were marginally higher by 5 bps on a sequential basis due to a lower base.