Hero MotoCorp posts 33% rise in net profits in Q1 FY2016

Despite a dip in its sales volume, homegrown two-wheeler manufacturer Hero MotoCorp reported a 33% surge in its net profit to Rs 750.34 crore for the quarter ended June, as the company’s input costs declined largely because of a fall in raw material prices.  

The company’s sales fell 4.2% on year to 16.45 lakh units in the April-June quarter. As a result, its turnover also declined 1.2% to Rs 6,955 crore. Cost of materials consumed during the quarter fell nearly 4% on year to Rs 4,869.43 crore.

Slowing demand from rural markets due to an uncertain monsoon during the period under review and rising competition in the commuter motorcycle market affected Hero MotoCorp’s sales in the quarter. However, the company retained its market leader status with the help of some fresh product launches.

“During the first quarter (April-June) of FY16, we continued to strengthen our market leadership through a combination of new product launches and strategic marketing initiatives. We further expanded our already wide and diverse product portfolio with two new offerings – the Xtreme Sports and Passion Pro - in this quarter,” said a company release.

As per data from industry body Society of Indian Automobile Manufacturers, Hero MotoCorp remained the country’s largest two-wheeler maker with a 40.26% market share in April-June. It also continued to lead the motorcycle market with a 53.51% share.  

Going forward, the company has planned a slew of fresh launches to cash in on the festival season starting in September. Hero MotoCorp is planning to launch two new scooters, namely the Dash and the Maestro Edge soon. Autocar Professional had reported in March that Hero MotoCorp had started production of the 110cc Dash at its facility in Gurgaon.

According to the specifications revealed by the company at the 2014 Auto Expo where the Dash scooter was first unveiled, the upcoming model will be powered by a new four-stroke, force-air-cooled, single-cylinder, 111cc petrol engine, which will generate a maximum power output of 8.5bhp.

The Maestro Edge will mark the company’s entry into the 125cc scooter segment, which is currently dominated by Honda with its range of Activa and Aviator scooters. Reports suggest that the Maestro Edge will be powered by an air-cooled, single-cylinder engine that can generate up to 1bhp more than the current Maestro version. The 109cc Maestro generates a peak power output of 8.04bhp.

Expectations of an improved monsoon will aid Hero MotoCorp going forward and analysts believe that with a robust product pipeline the company could gain some market share in the highly competitive scooter segment.

“We expect the industry to move in an upward trend in the coming quarters although a lot will depend on multiple factors, including good monsoon, rural income and overall market sentiments," the release said.