Hero Moto’s lost sales will take a toll on its earnings — profit likely to fall over 88% in the first quarter

BCCL
  • According to various analyst reports, Hero MotoCorp is likely to see a 66% revenue dip and over 88% fall in its profit in its first-quarter earnings.
  • The sales were down nearly 54% in the first quarter due to weak market sentiments.
  • However, the company is seeing some signs of recovery. According to the lobby of auto manufacturers FADA, Hero’s India market share has risen to 41% for July.
Rural demand may cushion Hero MotoCorp's first quarterly earnings, but the loss of sales in April may take a toll on its profit. India’s largest two-wheeler manufacturer will announce its first-quarter results tomorrow.

The lost sales account more than what the company sold during the quarter under review. The sales were down nearly 54% in the first quarter due to weak market sentiments.

Hero MotoCorpApril to June 2019April to June 2020Growth%
Sales12,26,3945,63,426 -54%

According to various analyst reports, the company is slated to see a 66% revenue dip, and over 88% fall in its profit in its first-quarter earnings.
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Brokerage on Hero MotoExpected profit growthExpected revenue growth
Prabhudas Liladher-76.20%66%
Share Khan-95.40%-65%
Nirmal Bang93.80%66.40%

The company also informed investors that the full demand recovery is only expected as early as in the second half of the year — driven by buoyancy in rural sentiments, pent-up demand, and preference for personal transport to ensure safety in a post-COVID era.

COVID-19 has hurt the automobile sector in India, and Hero’s story is no different. But Hero MotoCorp was one of the first few companies that emerged stronger from the lockdown as compared to its peers.

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Despite the lost sales, according to the lobby of auto manufacturers FADA, Hero’s market share has increased up to 41% in India — all thanks to the normal monsoon, a bumper Rabi crop, and its greater reach in the rural market.


And, that is what the investors have been betting on, the share price is trading higher than its pre-COVID level. The stock has multiplied investor wealth over 74% since the beginning of the first quarter.


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However, analysts at Dolat Capital still believe that the short-term business outlook remains uncertain due to the COVID-19 pandemic. Brokerages are expecting the numbers to be better than what its competitor TVS posted last week. But it is pertinent to note that TVS Motor reported a standalone net loss of ₹139.1 crore for the first quarter ended June 30.

Brokerages on HeroRecosTarget Price
ShareKhanBuy₹3,100
IIFLBuy₹2,875
HDFCBuy₹3,100

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