Hero MotoCorp (HEROMOTOCO) Q4 05/06 earnings summary

Executive summary

• FY06 unit sales reached a record 3,000,751, up 14.5% YoY; total income rose 17.4% to ₹8,870cr and PAT increased 19.8% to ₹971cr.

• Maintained leadership with 40% of the two-wheeler market and nearly 50% of motorcycles; cumulative customer base reached 15 million.

• Growth plans combine new models, further capacity expansion and deeper distribution, while rising input costs and fiercer competition pose risks.

Financial highlights

• Net sales, excluding excise, grew 17.4% to ₹8,714cr from ₹7,422cr; gross sales were ₹10,086cr.

• PBT rose 16% to ₹1,412cr; PAT increased 19.8% to ₹971.34cr from ₹810.47cr.

• Operating profit before other income grew 16.2% to ₹1,256cr; EBITDA margin held at 15.7%, while operating profit margin eased to 14.4% from 14.6%.

• Raw materials fell to 69.5% of sales from 70.1%, supported by favorable sales mix and cost rationalization.

• Operating cash flow reached ₹936cr versus ₹747cr in FY05.

Outlook and guidance

• FY07 sales growth target is double digit; eight models and variants were planned, with Glamour FI launched in June 2006.

• Two-wheeler and motorcycle markets were expected to grow at double-digit rates over the next three years; FY07 industry outlook was 12–15% annual growth.

• Planned capacity expansion targets 3.9 million units; a new plant was expected within one year, initially producing 500,000 units with ~₹320cr investment funded by internal accruals.

• Planned growth focus spans metros, emerging cities and rural markets, supported by new channels, financing products and supply chains.