Hero MotoCorp shares slip 2% after June quarter profit plunges 95% YoY

Shares of Hero MotoCorp slid 2 per cent to Rs 2,757.66 on the BSE after the two-wheeler maker reported a 95 per cent year-on-year (YoY) decline in consolidated net profit at Rs 57.78 for the quarter ended June 30 (Q1FY21), on account of lower sales due to Covid-19 pandemic.

Total income during the quarter under review declined to Rs 3,119.22 crore as compared with Rs 8,410.41 crore in the year-ago period, Hero MotoCorp said in a regulatory filing.

The two-wheeler major sold a total of 565,000 units of motorcycles and scooters in the first quarter of fiscal 2020-21 as compared with 1.843 million units in the same period of FY20.

"The Covid-19 period has been an unprecedented challenge for the automotive industry, as indeed for several other sectors and economies around the world," Hero MotoCorp CFO Niranjan Gupta said.

"The company was quick to begin work on cost control and efficiencies that enabled it to limit the impact of the unprecedented times during the first quarter of the financial year. Cash conservation efforts and rationalisation of expenses, along with productivity enhancement measures, have helped us pass through the uncertain period as we now enter the phase of rapid recovery and return of demand," Gupta said.

The company is already seeing green shoots, and expects them to sustain and get stronger as it moves toward the festive season, he added.

"Our July month sales were more than 95 per cent of pre-Covid sales and we do see positive trend moving forward," he noted.

The company said that about 95 per cent of its customer touch points were fully operational and the company's eight production facilities -- six in India and two abroad -- have resumed manufacturing.

At 11:02, the stock was trading 0.86 per cent lower at Rs 2,786.95 as compared to 0.28 per cent gain in the S&P BSE Sensex. Around 8.65 lakh shares have already changed hands on the NSE and BSE, combined, so far

Motilal Oswal said the company's results were above its estimates.

"1QFY21 realizations grew 21% YoY (+12.8% QoQ) to around Rs 52,700 (v/s est. Rs 48,800). Realization improvement was driven by BS6 related prices as well as higher contribution from non-vehicle sales. Gross margin declined around 90bp YoY (-130bp QoQ) to around 29.5% (v/s est. ~31.5%), impacted by lack of loading of contribution margins on BS6 cost pass-on. Further, operating deleverage resulted in EBITDA margin of ~3.6% (v/s est. -0.5%). The stock trades at 20.1x/16.4x FY21/FY22E EPS," it said.

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