PL First Cut - Hero MotoCorp 2QFY24

PL First Cut – Hero MotoCorp 2QFY24 – Himanshu Singh – Research Analyst, Prabhudas Lilladher Pvt Ltd

Hero MotoCorp [HMCL IN| TP: INR3,575 | ACCUMULATE]

First Cut 2QFY24 results – in line performance, PAT beat on higher other income

Revenue grew by c4% YoY to Rs. 94.5bn and came largely in line with our (Rs. 93.2bn) and Bloomberg consensus estimates (BBGe) (Rs. 93.4bn). Standalone EBITDA margins at 14.1% (+262bps YoY and +c30bps QoQ) were exactly in line of PLe and slightly higher than BBGe (13.9%). Gross margin was lower QoQ ~80bps and in line with PLe, GM were helped by lower commodity cost, leap savings, and better product mix. Other expenses came slightly higher than expected, however, employee cost came largely in line. Higher than expected other income aided the beat on adj PAT versus PLe and BBGe by c10%.

Management commentary

“A healthy festive demand across most categories and specifically in the auto sector has demonstrated the underlying propensity of the robustness of the market. The consumer confidence is coming back, which augurs well for the growth momentum moving forward. ”

“The premium range of products which have been launched across all key models have been received by the customers very well. Our strong margin shape will help us even more in deploying necessary fuel behind growth priorities”

“The global macro headwinds may keep the playfield a bit uncertain, and navigating the same over next few quarters will be important.”

PL View:

Revenue and margins were in line versus our and consensus estimates. Other income have been higher for consecutive quarters, will look for more clarity on its sustainability. Hero noted increase in consumer confidence to help momentum, but sees macro headwinds impacting the same over the next few quarter, should be interesting to see if they revise their full year double digit revenue growth guidance. The call is scheduled for tomorrow at 11:30 AM and we will circle back with more details post that.

Standalone Financial performance vs PLe:

Volumes was flattish YoY by -0.8%, grew QoQ by 4.7%

Revenue grew YoY by 4.1% to Rs. 94bn, and QoQ by 7.7%, and largely in-line vs PLe

EBITDA grew YoY by 27.9% to Rs. 13bn, and QoQ by 10.1%, and largely in-line vs PLe

APAT grew YoY by 47.2% to Rs. 11bn, and QoQ by 11.5%, and beat PLe by 10.3%, largely led by higher other income

EBITDA margin expanded YoY by 262 bps to 14.1%, and QoQ by 30 bps, and in line vs PLe

Revenue per unit grew YoY by 4.9%, and QoQ by 2.9%, and largely in-line vs PLe

EBITDA per unit grew YoY by 29%, and QoQ by 5.1%, and largely in-line vs PLe by 1.1%