Hero Moto Beats Es­ti­mate, but Stock may Trade in Range

Bet­ter cost con­trol helps co off­set lower vol­ume growth, sin­gle-digit growth in FY18 likely

The Economic Times - - Companies: Pursuit Of Profit -

ET In­tel­li­gence Group: Hero Mo­to­Corp, In­dia’s largest mo­tor­cy­cle maker, beat the con­sen­sus earn­ings es­ti­mate by a wide mar­gin in the De­cem­ber quar­ter. Bet­ter cost con­trol helped to off­set lower vol­ume growth. But, it may not help its stock to break the range-bound move­ment be­tween ₹ 2,800 and ₹ 3,400 seen since Oc­to­ber 2016 given the high vol­ume base in the past which will re­strict t h e ye a r- o n - ye a r growth rate in the com­ing months and a slower de­mand recovery in the ru­ral market in the af­ter­math of de­mon­eti­sa­tion.

The com­pany needs to re­port a se­quen­tial growth of 7.9% in the fourth quar­ter of the fis­cal (March 2017), which means sell­ing 15.9 lakh units more, to avoid re­port­ing a year-on-year vol­ume de­cline for the fis­cal. It sold 50.4 lakh units in the first nine-months of FY17 and an­other 4.9 lakh units in Jan­uary 2017. This means it has to sell 5.5 lakh units each in Fe­bru­ary and March. This will be an up­hill task in a weak de­mand­sce­nario.An­a­lyst­sex­pecta fall of 2% in vol­ume for the cur­rent fis­cal and a tepid growth of 5% for the next fis­cal.

The com­pany’s vol­ume fell by 12% in the third quar­ter and dropped by 13% in Jan­uary this year due to a slow recovery in the ru­ral market. Amid lack­lus­tre de­mand, the com­pany has been fo­cus­ing on cost con­trol by im­ple­ment­ing LEAPS pro­gramme.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.