Hero MotoCorp hits 52-week low on disappointing Q4 results

Shares of Hero MotoCorp (HMCL) hit their 52-week low of Rs 2,510, down 4 per cent on the BSE, after the company’s Ebitda (earnings before interest, tax, depreciation and amortization) margin contracted 240 basis points (bps) at 13.6 per cent for the fourth quarter ended March 31, 2019 (Q4FY19).

The management said the near-term prospect of the domestic two-wheeler market is likely to remain challenging, the festive season however is expected to brighten the sentiment and revive growth in the second half of FY'20.

The country's largest two-wheeler maker HMCL Friday reported 24.5 per cent decline in its standalone net profit at Rs 730 crore for Q4FY19. The company had posted a net profit of Rs 967 crore during the same period last year.

Operational revenue during the quarter declined 8 per cent to Rs 7,885 crore as compared with Rs 8,564 crore during the same period in previous fiscal.

Analysts at Antique Stock Broking believe HMCL will find it increasingly difficult to defend its market share going ahead, considering the growth challenges for commuter motorcycle segment and Bajaj's continued price aggression in entry segment.

“We will also be watchful of its product performance in BSVI regime as large disruption in any of its core models will dampen its volume growth prospects significantly. We believe many of its competitors are also keeping an eye on this aspect to fill in the void if any product-related issues emerge for HMCL,” the brokerage firm said in result review with maintain ‘sell’ rating and target price of Rs 2,251 per share.

“HMCL margin remains resilient in a tough environment of weak demand, rising discounts as well adverse commodity prices; we expect margin to improve from the current levels in FY20 owing to higher volumes. We remain watchful over high levels of dealer inventory as rural demand has slowed significantly; marriage season retail demand in Q1FY20 will remain key,” analysts at Elara Capital said in quarterly update.