Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hero MotoCorp Ltd (BOM:500182, Financial) achieved its highest ever quarterly revenue of INR10,144 crores, marking a 16% year-on-year growth.
- The company reported its highest ever profit after tax (PAT) of INR1,123 crores, a 36% increase year-on-year.
- EBITDA grew by 21% year-on-year to INR1,460 crores, with ICE margins improving to 16.4%.
- The company saw a sharp recovery in the 125cc segment, increasing its market share from 13% to 20%.
- Hero MotoCorp Ltd (BOM:500182) expanded its VIDA EV presence to 175 cities with close to 300 dealers, contributing to a positive outlook for future growth.
Negative Points
- The impact of investments in the EV business reduced overall EBITDA margin by 198 basis points, bringing it down to 14.4%.
- Bangladesh operations faced setbacks, contributing to a short-term disruption in the global business segment.
- Despite strong financial performance, the company's overall market share in the two-wheeler industry remains under pressure.
- The parts revenue contribution decreased from 14.7% in Q4 to 12.5% in Q1, affecting gross margins.
- The company faces challenges in ramping up production capacity for high-demand models like the Xtreme 125R, which currently reaches only 40% of its network.
Q & A Highlights
Q: How are you seeing demand trends in both urban and rural markets for your volumes?
A: We are seeing an uptick in rural markets, which is leading to a more balanced growth overall. Our strong brand and network in rural areas are contributing to this positive trend. The economic measures by the government and good rainfall are expected to further boost rural demand.
Q: What is the potential for CNG vehicles in the market, and does Hero MotoCorp have any plans in this area?
A: The market will continue to see alternative powertrain technologies. We are working on various technologies, including Flex fuels, ethanol-based fuels, and hybrid technology. Our R&D is focused on improving fuel efficiency and making operating costs more efficient and greener.
Q: Can you provide an outlook on the EV market and the cost of manufacturing EVs?
A: The EV two-wheeler market in India is growing, and we expect it to be a 1 million-plus market. We are working aggressively on reducing costs through technological improvements, localization, and scaling up. This will be reflected in our upcoming affordable products.
Q: What explains the 3% Q-on-Q decline in ASP and gross margin performance for this quarter?
A: The decline is primarily due to a lower parts mix this quarter compared to previous quarters. However, our EBITDA margins have improved sequentially and year-on-year, driven by operating leverage and cost-saving initiatives.
Q: What is the ramp-up plan for the Xtreme 125, and how are Glamour and Passion performing?
A: The Xtreme 125 has seen a sharp increase in market share, and we are increasing its capacity to meet demand. Glamour and Super Splendor have also gained market share, and we are seeing positive advocacy and strong demand in regions where these models are popular.
Q: How are you managing channel inventory heading into the festive season?
A: We are gearing up for a strong festive season and managing our inventories accordingly. Our target is to maintain a 4 to 6-week inventory range post-festive season.
Q: What are your plans for new product launches and market share recovery?
A: We have a strong pipeline of new products across various segments, including premium motorcycles, scooters (both ICE and EV), and affordable EVs. Our focus is on building leadership in these segments and expanding our market share.
Q: What is the impact of the EV business on overall profitability, and when can we expect it to become profitable?
A: While we are not providing specific guidance on profitability, we are focused on building scale and leadership in the EV segment. Our cost reduction initiatives and PLI compliance for new products will help us move closer to profitability.
Q: How are you expanding your export presence, and what is the impact of the Bangladesh market?
A: We are making steady progress in exports, with recent entries into Southeast Asia and Brazil. While Bangladesh has faced setbacks, it forms a small part of our overall revenue. We are focused on scaling up in other markets and expect recovery in Bangladesh operations.
Q: What is the current financing penetration, and how are you addressing the entry-level segment?
A: Our financing penetration is at 60%. We are focusing on innovative financing solutions like Hero DigiFin to make financing more accessible and affordable, especially for entry-level buyers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
