Hero Motocorp reports flat growth in Q3FY23 net profits

India’s largest 2-wheeler manufacturer, Hero Motocorp, reported 2.41% growth in net profits for Q3FY23 at Rs721 crore and a marginal 2.05% growth in revenues at Rs8,300 crore. It may be recollected that Hero Moto had embarked on an aggressive cost cutting program and multiple product launches to protect its top line and bottom line in tough market conditions.

For December 2022 quarter, Hero Motocorp reported EBITDA of Rs924 crore, but EBITDA margins tapered as expenses were higher. Hero Moto was forced to give higher discounts in a competitive EV market and that dented EBTIDA margins. Hero Motocorp declared an interim dividend of Rs65 per share for FY23. Payment of interim dividend would be completed by 09th March 2023.

The big challenge for Hero Motocorp in last few quarters was its core entry-level segment due to weak demand in rural areas. Rural India is facing higher inflation compared to urban India while rural incomes were hit by weak Kharif output this year. The Rabi crop is better but that would take some time to impact purchasing power. Hero Motocorp lost nearly 400 bps market share in the 2-wheeler segment since 2019, with market share falling from 36% to 32%.

In terms of guidance provided, Hero Moto has started dispatches of Hero Vida and has also launched a new scooter brand (Xoom). The pricing has been very aggressive to get a foothold in the scooter segment. Growing is likely to be driven by recovery in rural incomes, pick-up in exports, premiumisation of offerings and aggressive push to EV volumes.