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Home Industries Automobile Volume growth, market share gains key for Hero MotoCorp, going ahead

Volume growth, market share gains key for Hero MotoCorp, going ahead

National, February 16, 2021: Hero MotoCorp posted its best ever quarterly numbers, following its listed peers in the two-wheeler space, thanks to higher volumes.

While Bajaj Auto and TVS Motor reported revenue growth of 16-31 per cent respectively, Hero MotoCorp’s top line growth came in at 39 per cent.

Revenue growth was led by a jump in volumes as well as realisations.

The gain in realisations came from price hikes, its portfolio tilt towards premium products, and higher revenues from parts/accessories.

In addition to new launches and restructuring across product segments, festival demand also aided growth.

Its highest ever monthly volumes came in October, with the wholesale figure at over 800,000 units.

While domestic volumes were down 4.1 per cent YoY in January, the company indicated that underlying demand trends remain strong, led by the rural segment.

Further, with urban markets opening up and more sectors contributing to the economic recovery, demand growth is expected to be strong according to the reports published in rediff.com.

Highlighting the student/education segment, in which demand had dipped, the firm said reopening of institutions was expected to give a fillip to volumes.

Rise in commodity costs dented gross and operating profit margins, with raw material costs as a proportion of sales up over 400 bps YoY.

While margins were down 30 bps over the year-ago quarter, price hikes taken in October, operating leverage, and product mix helped improve margins by 30 bps to 14.5 per cent, sequentially.

While the price hikes are expected to offset the impact of raw material inflation, the firm said the ongoing cost saving measures will be able to absorb the rest.

While it is looking to balance market share and margin needs, the management is confident of achieving 14-16 per cent margin band over the medium term.

On the growth front, premium motorcycles — where it has a single-digit market share — and scooter segment are the two areas in which it is looking to increase market share.

The stock, which has gained 16 per cent over the last three months, hit its 52-week high on Friday, before closing flat.

Though Q3 was a strong quarter, steady volume growth in the months ahead will be key to further gains in the near term.

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