Shares of Hero MotoCorp slipped more than a per cent in Wednesday’s trade after the country’s largest two-wheeler maker reported a 17 per cent dip in its total sales at 4,54,582 units in October as compared with 5,47,970 units in the same period a year ago.
The bikemaker’s stock fell 1.09 per cent to trade at Rs 2,641. It cracked to an intraday low of Rs 2,631.85, down 1.44 per cent from its previous close of Rs 2,670.20.
Considering the day’s low figure, Hero MotoCorp shares traded more than 10 per cent lower from their August highs, and 22 per cent higher from their March lows.
“Hero MotoCorp’s total wholesale volumes declined by 17 per cent YoY (year-on-year) in October 2022. However, the company highlighted that its retail sales in this festive period (the first day of Navratras to the day after Bhai Dooj) grew by 20 per cent as compared with last year’s festive period. We expect Hero Moto Corp’s Q2FY23E earnings to be lower than Q2 FY22, but is likely to witness growth over Q1 FY23,” Arun Agarwal, Deputy Vice President – Fundamental Research, Kotak Securities Ltd.
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Hero said it posted a retail growth of 20 per cent during the “32-day festive season” this year over the corresponding festive period of FY22.
The bikemaker sales didn’t pick up much in October this year as against the same period a year before, said AK Prabhakar, Head of Capital, IDBI Capital. Most automobile stocks witnessed profit-booking today as Indian equity benchmarks paused their four-day winning run, Prabhakar added.
In the domestic market, the company’s dispatches to dealers stood at 4,42,825 units, down 16 per cent from 5,27,779 units in the year-ago period.
“With festivals of Dussehra and Diwali — which triggers record retail buying — occurring in October this year, the dispatch sales of October are not comparable to the previous years, when the festival days are usually spread across October and November,” the two-wheeler major noted.
Exports stood at 11,757 units as against 20,191 units in October 2021.
Most of the other two-wheeler manufacturers, like Bajaj Auto, Honda Motorcycle & Scooter India and TVS Motor have also reported subdued sales during the festive season, which normally leads to the high takeoff of motorcycles and scooters.
“The auto industry is first of all going through a transition to EV (electric vehicle) and adoption of new technology. However, on a temporary basis, the demand has dropped due to the availability of second-hand vehicles and rising petrol prices. Second-hand vehicles being available at reasonable prices is also a concern for the demand of new vehicles. Stringent emission norms, high-interest rates and higher insurance costs are a few other reasons,” S Ravi, former BSE chairman & founder and managing partner of Ravi Rajan & Co, said.
Brokerage view
“Stocks specifically, within the two-wheeler companies, we believe it (Hero MotoCorp) is almost free from the exports weakness, led by improvement in the rural economy and upcoming EV launches, LKP Securities stated.
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“The two-wheeler industry saw YoY growth in retail sales in the festive season. However, weakness in preceding months and the need for inventory correction meant that wholesale growth in October was muted at around 2 per cent,” IIFL Securities said. “The (auto) industry may start reporting strong YoY trends from here on (November),” it added.
