Hope arising for Hero MotoCorp investors

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Hero MotoCorp Ltd.is the largest two-wheeler manufacturer in the world. They are the best performers of two-wheeler stock during Post-COVID and rising around 12 percent compared to its Pre-COVID highs at the end of January.

  All other two-wheeler competitors have fallen their stocks when compared to their highs in the earlier years. Investors believe that they are giving higher rural exposure and expected to do relatively better as compared to others.

In the quarter of June, their sales fell sharply which owing to the lockdown but, the company managed to maintain their head above the crisis reporting an operating profit of ₹108 crores and the Profit after tax stood at ₹61 crores.

The quarter 1 results of the profits came about largely owing to cost-cutting measures. Around 25 percent cover the capacity utilization, 3.6 percent stood as Operating profit margin, down from 14.4 percent in the year-ago quarter. Due to the impact of COVID-19 pandemic, the manufacturing units get closed the company was unable to fully recovery fixed costs of around ₹250 crore and they adjusted for the under-recovery cost. The company says that its operating profit margin for the quarter would have been 12 percent.

By tracking the fall in sales volumes by 69 percent and the quarterly revenue was down 63 percent. From the earlier quarters, the realizations per vehicle improved which reflects the benefits of BS-VI emission transition led price hikes but the drop in margins and operating profit slumped 91 percent.

In July their sales increased by 14 percent and are down just 4 percent from the year-ago month. During the first half of August the recovery continued with the need for personal mobility driving sales, the management told analysts in a post result call.

Mr. Niranjan Gupta, the Chief Financial Officer of Hero MotoCorp mentioned in the statement that they are already seeing green shoots, and expect them to sustain and get stronger as they move towards the festive season. Their sales in July were more than 95% of the Pre-COVID sales and it highlights a positive trend in moving forward. The top management is very confident about retaining the recent gains in volume market share.

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