Hero MotoCorp Ltd. | Q2FY15 First Cut Analysis | In line expectation, pressure was seen in EBITDA margin:: IndiaNivesh

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 Hero MotoCorp reported Q2FY15 net profit jumped by 59% YoY and 36%
QoQ to Rs. 7.63 bn due to higher other income and lower depreciation.
 However, Adjusted PAT (after adjusting impact of higher other income) stood
at 7 bn higher than our expectation of Rs. 6.84 bn. Revenue increased by
20% YoY ( down 2% QoQ) to Rs. 69.9 bn (in line with our expectation of Rs.
69.05 bn) on the back of strong volume growth.

 Major disappointment came from EBITDA front, EBITDA margin contracted
102 bps YoY to 13.5 % (we had anticipated margins to improve ~200bps QoQ
on stopping royalty payment to Honda Motor Co, along with favorable input
costs) due to higher raw material cost and other expenses.
 During the half year, the company has implemented Schedule II of the
Companies Act, 2013, and accordingly has computed the depreciation as
prescribed by the Act or actual useful life of assets, whichever is lower the
carrying value of the assets which has completed its depreciation period as
on April 1, 2014 has been adjusted to the General Reserve. The remaining
assets have been depreciated over the remaining useful life has been
recognized as charge in the statement of Profit and Loss for the half year
ended September 30, 2014.
 Other income of the company increased by 72% QoQ to Rs 1.93 bn while
interest expenses increased 66% QoQ. Depreciation decreased by 74% YoY to
Rs. 750 mn.

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