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Hero Motocorp Ltd (Hero) reported strong set of numbers in Q4. Volumes grew by 6.8% yoy and 2.5% qoq on low base yoy and a subdued festive season seen in Q3. Topline grew by 11.9% yoy on 4.8% growth in ASPs despite some price reductions done on the EV side and better product mix. Revenues grew by 3.4% qoq to ?83 bn as realizations supported them by growing 1% qoq. The spares business also supported the cause as they had a good growth. The retail demand in Q4 witnessed a solid recovery on the back of array of XTech launches (30% of volumes currently), marriage season seen in some markets, festive season in Maharshtra, AP, Karnataka etc and recovery in sentiments. Input costs to sales ratio in Q4 was at 68%, down
from 69.4% qoq and 69.3% yoy. Other expenses to sales narrowed down to 12.3% from 13.1% yoy despite higher EV expenses. LEAP -2 program helped the company to arrest a rise in other expenses. EBITDA margins were sequentially up by 150 bps at 13% supported by the input cost benefits, LEAP-2 benefits and product mix tilted towards high margin premium products. As depreciation expenses remained flattish yoy and qoq, and other income grew by 70% (on absence of MTM losses in Q4; seen in Gogoro and other investments in the base quarter), PBT grew by 43% yoy while PAT grew by 37% yoy at ?8.59 bn.

Volume growth to be seen on launches and multi-featured refreshes

The company is gaining strength through the XTech (Extra Technology) variant expansion across its brands (30% of current demand) seen in Q4. In the premium bikes segment, the company attained market share of higher single digits on the back of the recent launches of X-treme 160R and X-Pulse 200T bikes. The overall market share moved up by 3% qoq and 2% yoy at 51% during the quarter, though it was a bit lower for the full year. Going forward, the intrinsic growth drivers are expected to remain intact with the rural markets showing green shoots in the key markets of UP, Bihar, MP, Rajasthan and West Bengal. Rabi crop output may however get impact by unseasonal rains seen in April. Marriage season is expected to continue robust till the month of June. This will surely boost demand, mainly in the rural markets during Q1. Impact of possible El Nino may hurt rural demand during H2 of monsoon period. Urban demand remained strong throughout the quarter.

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