Hero MotoCorp Q4 Preview: Weak volumes to hit top and bottom line; margin may fall 100-150 bps

Profit may decline on YoY basis due to a muted volume performance. The automaker reported a 24.2 per cent YoY drop in volumes, thanks to recent price hikes, which hurt consumer sentiment. Weakened rural cash flows and weak festival demand also weighed on demand, said Nirmal Bang Institutional Equities, which expects the two-wheeler maker’s Ebitda margin to contract 154 basis points YoY due to elevated raw material costs, partly offset by price hikes.

This brokerage sees adjusted PAT falling 24.2 per cent to Rs 655.70 crore on a 14.7 per cent YoY fall in revenues at Rs 7,407 crore. Ebit margin is seen at 12.4 per cent against 12.2 per cent in December and 13.9 per cent in the year-ago quarter.

Foreign brokerage Nomura India pegs profit at Rs 683.40 crore, down 21 per cent YoY. It sees sales falling to 7,447.10 crore. Margins are seen at 12.4 per cent against 12.2 per cent in the December quarter and 13.9 per cent in the year-ago quarter.

“We estimate revenues to decline 14 per cent YoY as volumes are down 24 per cent YoY offset by price hikes and higher spares mix. Margins likely to remain flat sequentially on weak operating leverage and commodity headwinds,” Nomura India said.

Revenues, said Emkay Global, may decline owing to a 24 per cent drop in lower volumes despite higher realisation (up 13 per cent) on price hikes.

This brokerage sees Hero MotoCorp’s profit falling 20.9 per cent to Rs 684 crore from Rs 865 crore in the same quarter last year. Net sales are seen slipping 14.2 per cent YoY to Rs 7,452.4 crore from Rs 8,686 crore in the year-ago quarter.

Centrum Broking sees profit falling 15.6 per cent to Rs 729.60 crore on an 11.3 per cent drop in sales at Rs 7,704 crore. It sees Ebitda’s margin at 12.9 per cent. The sequential rise in margin would be led by product mix, it said.