Hero MotoCorp is expected to report a muted FY19Q4 performance on Friday amid an 11 per cent YoY degrowth in volumes, analysts say. Moreover, competitive pricing pressure and negative opearing leverage due to inventory correction might impact the company's operating margin and profitability for the quarter.
Analysts see the update on demand trend in rural and urban markets and new model launch pipeline as the key monitorables in the results announcement.
ICICI Securities expects the company's net profit to decline 20 per cent to Rs 770 crore in FY19Q4 while the sequential dip may be around 1.2 per cent. Reliance Securities also sees the PAT in similar range -- at Rs 760 crore, a decline of 21.4 per cent YoY, while HDFC Securities pegs it to decline 21 per cent YoY to Rs 800 crore.
Hero MotoCorp had posted a net profit of Rs 967.4 crore in FY18Q4.
Subdued volume performance coupled with adverse product-mix is expected to impact the company's revenues which is likely to decline in the range of 8-11 per cent.
ICICI Securities sees a 9.1 per cent decline in revenues on a YoY basis at Rs 7,787.6 crore while Reliance Securities says the slippage could be 8.3 per cent YoY to Rs 7,849.9 crore.
"We expect a decline in revenue of 9 per cent YoY, due to 11 per cent YoY drop in volumes," analysts at HDFC Securities said, adding that they expect volume to slide to 17,81,250 units.
The brokerage firm sees the company's Q4 net sales at Rs 7,800 crore, a 9 per cent slippage YoY and 1 per cent QoQ decline.
At operating level, brokerages expect EBITDA (earnings before interest, tax, depreciation and amortization) margins to find some support from the lag effect of benign raw material prices as well as lower apportioned employee costs. EBITDA in Q4FY19 is seen at Rs 1,153 crore with corresponding EBITDA margins at 14.8 per cent, up 80 basis points (bps) QoQ but down 120 bps YoY, according to ICICI Securities.
HDFC Securities, which has a 'weak' outlook towards Hero MotoCorp, said it expects the margin to contract by 220 basis points (bps) YoY (-25bps QoQ) to 13.8 per cent.
Reliance Securities expects EBITDA margin to decline 229 bps YoY to 13.7 per cent while EBITDA may come around Rs 1,076.7 crore.