IGI Logo

Hero Motocorp Ltd (Hero) reported strong set of numbers in Q2 FY24. Volumes de-grew by 0.8% yoy and 4.7% qoq as 2W segment saw a gradual sequential pick-up in growth post a dull FY 23. Topline grew by 4.1% yoy on 7.7% qoq on growth in ASPs and better product mix. Net realizations grew by 2.9% qoq and 4.9% yoy to Rs66.7K. The spares business also supported the cause as they had a good growth. The retail demand in Q2 witnessed a solid growth on the back of array of XTech launches (30% of volumes currently), pick up in rural demand and various variants launches of existing models. Input costs to sales ratio in Q2 was at 68.6%, down from 69.4% qoq and 72% yoy as commodity costs softened. Other expenses to sales moved up to 11.2% from 10.6% yoy on higher EV expenses, expansion in dealerships, new launches etc. EBITDA margins were sequentially up by 30 bps and 270 bps at 14.13% supported by the input cost benefits, LEAP-2 benefits, operating leverage and product mix tilted towards high margin premium products. As depreciation expenses remained flattish yoy and qoq, and other income grew handsomely, PBT grew by 45% yoy while PAT grew by 47% yoy at Rs10.53 bn

Volume growth to be seen on launches, festive cheer and rural pick -up

The company is gaining strength through the XTech (Extra Technology) variant expansion across its brands (30% of current demand) seen in Q2. In the premium bikes segment, the company attained market share of higher single digits on the back of the launches of X-treme 160R and X-Pulse 200T bikes. Going forward, the intrinsic growth drivers are expected to remain intact with the rural markets showing good growth in the key markets of North, Central and East through Hero’s mass segment bike HF Deluxe showing a double digit growth. Rabi crop season seems to be bullish although the south west monsoon was low and patchy. Demand for Hero’s 125 cc bikes like the Super Splendor XTech, Passion and its variants and Glamour led bulk of demand in the quarter. Urban demand remained strong throughout the quarter. The company plans to launch 5-6 premium bikes by Q4 FY24. On the EV side, Hero has forged several partnerships and collaborations on this front including charging infrastructure. The company has plans to expand its EV presence upto 100 cities by end of FY24 and is well on track currently. Increased emphasis on premiumization by launching high end variants under the X-Tech brand, Harley Davidson and Karizma launches in the premium segment should enable the company to post a good volume growth in FY 24E and FY 25E and increase its market share further.

For More  LKP Securities Ltd Disclaimer  http://www.lkpsec.com/

SEBI Registration number is INM000002483