Hero Honda Motors Ltd, India’s largest two-wheeler maker, posted a greater-than-expected 95% jump in second-quarter profit as the company sold more of its Splendor, Hunk and CBZ models as an erratic monsoon failed to deter rural buyers who make up about 40% of its customers.
Net profit in the three months ended 30 September rose to Rs597.1 crore from Rs306.3 crore a year earlier. Sales rose 27% to Rs4,040.1 crore from Rs3,189.7 crore, the company said in a release on Wednesday. The results were announced after markets closed. A Mint poll of five analysts on 13 October forecast net profit at Rs539.7 crore.
Hero Honda’s jump in earnings reflect the surge in vehicle sales across the automobile industry, holding out the possibility of a sustained revival in the economy that had slowed after being gripped by a credit squeeze in September last year.
Anil Dua, senior vice president, sales, marketing and customer care, said the sales of premium bikes rose 40% against the overall company growth of 22%.
The margin widened to a record 18.3% from 13.6% on greater economies of scale, benign raw material costs and lower administrative and plant expenses, said Ravi Sud, senior vice president and chief financial officer, in a phone interview after the earnings announcement. Sustaining these margins will however be a challenge, Sud said.
The sales surge came in spite of a lack of improvement in loans for bikes, Dua said.
Currently, 20-20% of bikes are financed compared with 55% in 2006, he said. Hero Honda has tied up with cooperative banks and regional rural banks, Dua said.
There was no major concern on account of the monsoon, Dua said. He said sales didn’t flag as the monsoon recovered in time for the festive season.
Hero Honda shares fell 2.86% to Rs1,610.45 in Mumbai trading on Wednesday, having doubled this year. The Sensex, the BSE benchmark equity index, fell 1.24% to 17,009.17 at the close, having risen 76% this year. The BSE Auto Index fell 2.36% at the close, having risen 166% this year.
Live Mint
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