First cut | Hero MotoCorp Q3FY19: Margin under pressure, subdued demand outlook near term

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First cut | Hero MotoCorp Q3FY19: Margin under pressure, subdued demand outlook near term

Hero MotoCorp Ltd (HMCL) posted operationally disappointing numbers in Q3FY19. On a year-on-year (YoY) basis, net operating revenue clocked a subdued growth of 7.5 percent driven by a weak volume growth of 5.3 percent. Average realisation grew 2.2 percent YoY. An increase in fuel prices, a rise in interest rates, higher compulsory long-term insurance prices, rainfall deficit and weak festive demand dampened demand for HMCL.

Negative operating leverage coupled with rising raw material prices led to 4.6 percent YoY decline in earnings before interest, tax, depreciation and amortisation (EBITDA). EBITDA margin also witnessed a contraction of 175.3 bps on YoY basis. Profit-after-tax (PAT) declined 4.5 percent on YoY basis.

In light of sluggish near-term outlook, we believe the stock will have limited upside, although we have a positive long-term view on the stock.

For more research articles, visit our Moneycontrol Research page.

Images are for reference only.Images gathered automatic from google.All rights on the images are with their original owners.

2019-02-03 08:26:12

Images are for reference only.Images gathered automatic from google.All rights on the images are with their original owners.

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