Shares of Hero MotoCorp Ltd. fell the most since April 2022 after the company said EV push will weigh on its margin even as its third-quarter profit beat estimates.
India's largest two-wheeler maker's third-quarter net profit jumped 51% meeting analysts' estimates. Revenue also rose aided by higher sales during the festive season.
Hero MotoCorp Q3 Earnings Highlights (Standalone, YoY)
Revenue up 21% at Rs 9,723.7 crore. (Bloomberg estimate: Rs 9,665.3 crore).
Ebitda up 47% at Rs 1,362 crore. (Bloomberg estimate: Rs 1,345 crore).
Margin expands to 14% vs 11.5% (Bloomberg estimate: 13.9%).
Net profit up 51% at Rs 1,073.4 crore. (Bloomberg estimate: Rs 1,042.1 crore).
EV Spending Weighs On Margin
However, the maker of Vida battery-powered scooter said in its earnings call that it expects a 125–150-basis-point hit on margin for the year due to the electric vehicle segment.
Costs during the quarter were elevated because of advertising and promotional spending during the festive season, Chief Executive Officer Niranjan Gupta said. Also, the unit cost, unit margins in the EV industry are low and "there is obviously marketing spend being done to build Vida as an aspirational brand", he said explaining the potential impact on margins.
On the NSE, Hero MotoCorp's stock fell as much as 5.73% during the day to Rs 4,627.55 apiece, the lowest since Feb. 2. It was trading 4.57% lower compared to a 0.5% decline in the benchmark Nifty 50 at 12:33 p.m.
The stock gained over 7% in the previous six sessions and surged 80.16% in the last 12 months. The total traded volume so far in the day stood at 1.29 times its 30-day average. The relative strength index was at 60.44.
Of the 44 analysts tracking the company, 28 have a 'buy' rating on the stock, eight recommend 'hold' and as many suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential downside of 0.8%.
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