Hero MotoCorp will report its quarterly earnings today and the two-wheeler maker is likely to report weak results following weak demand.
- After Bajaj Auto’s weak performance, the expectation is that even Hero Motocorp could be under pressure. The entire sector is undergoing a slowdown because of higher ownership cost on account of the higher insurance, higher fuel cost etc and that has dampened demand quite a bit.
- For Hero Motocorp, it will be the second consecutive quarter of a single-digit volume growth. This time around the volumes have grown just 5 percent year-on-year (YoY) compared to a 5.5 percent YoY growth that we saw in the last quarter.
- This compares to an average of 15-20 percent growth that we have seen in the preceding 15 quarters. So this slowdown is quite deep as we are seeing it in the second consecutive quarter. All of this will have an impact on the margins as well.
- The street is expecting the margins for the company to decline 50 basis points (bps) quarter-on-quarter (QoQ) and 160 bps YoY because of higher launch related expenses that they incurred, higher discounts – discounts were at record highs – raw material costs have been higher and also expiry of the tax benefits at the Haridwar plant.
- All of this will have an impact on realisations too. Realisations are expected to rise 0.9 percent, so largely flat on a sequential basis.