1Q FY13 results in line with expectations
Hero Motocorp (Hero)’s 1Q volumes were up by 7% yoy and 4% qoq. Net profits were up by 10.3% yoy and 2% qoq. The company took a price hike of Rs500-1000 in May to compensate for the rise in RM costs, the impact of which was not completely seen in Q1 FY13 as realizations were dampened due to adverse product mix. The company sold less number of scooter Pleasure on competition and promoting new scooter Maestro. EBITDA grew by 16% to Rs 8.9bn, while margins improved by 20 bps qoq and 80 bps yoy to 14.5% due to softer RM prices and price hike despite Yen appreciation and adverse product mix. RM to sales declined yoy from 75.3% to 74.1%, while other expenses to sales ratio remained flattish. Other income remained flattish, due to which PAT came in slightly below our expectations. Tax rate came in at 16.3% which was down from 19.5% in Q4. Royalty expenses to Honda came in at Rs2.2 bn as Yen appreciated significantly (~7%) in Q1 v/s rupee. This brought the net profits down to Rs6.15bn, which was just 2% up sequentially.
