Hero MotorCorp Q1FY22 Result Analysis

Q1FY22 Standalone Financial Highlights

• Revenue from operations stood at Rs. 5,502.8 crores as compared to Rs. 2,969.1 crores in Q1FY21, a growth of 85.3%. Revenue from operations in Q4FY21 was 8,689.7 crores, it declined by (-36.67%) in Q1FY22.
• EBITDA in Q1FY22 was Rs. 519.7 crores, a growth of 344% YoY and a decline of (-57.6%) QoQ.
• EBITDA margin in Q1FY22 stood at 9.44%. In Q4FY21 it was 14.1% and in Q1FY21 it was 3.9%.
• PAT in Q1FY22 was Rs. 256.1 crores. A growth of 333% YoY and decline of (-70.9%) QoQ.
• The high YoY growth is due to lower base in the similar quarter last year.
• Increase in raw material costs which were higher than the price increase taken by the company resulted in a reduced EBITDA margin.
• The volumes declined by (-35%) QoQ due to a poor mix.
• Margins were impacted due to rise in commodity prices.

Business Highlights

• The company has sold more than million units in Q1FY22 despite the disruptions due to COVID.
• The company had shut down its production for some time during the quarter due to rising COVID cases.
• The company has entered into strategic partnership with Gogoro Inc. This will help company to accelerate its shift to electric mobility.
• The JV with Gogoro will bring its battery swapping platform to India.
• The company with Harley Davidson announced the pricing of H-D 2021 model.
• 90% of the company’s outlets are operating normally. Retails have reached 80% of pre-COVID levels.
• The company expects positive trend in volume due to upcoming festive season.
• The company expects to offset the Q2FY22 cost increases with a Rs. 1,200 price hike in July-21 and implementing cost saving strategies. The company has already taken price hikes of Rs. 600 in Apr 21 and Rs. 2000 in Q1FY22.
• The company expects the commodity costs to stabilise during Q2FY22.
• The exports of the company have grown and expect to reach a run rate of 3 lakh units per year.
• The company is seeing improvement in market share in its 7 out of 8 markets.
• The company will be launching a in house fast charging solutions product.
• The products with Gogoro partnership will be launched in market by 2^nd half of CY22.
• The company has also planned a capex of Rs. 750 crores – 1,000 crores for upcoming five years. The company would be investing 50% of this capex towards EVs, premium vehicles and exports.
• 90% of the company’s revenues come from bikes and initial launches in EVs will be in scooter segment, these factors make the company less vulnerable to EVs.
• The contribution form spare parts reduced to 8% in Q1FY22 as compared to 12% in Q4FY21. The company expects the contribution to rise to 10% in upcoming quarters.
• Hero MotoCorp is not facing any issues due to semiconductor shortages.