Release Date: April 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hero MotoCorp Ltd (BOM:500182, Financial) reported its highest-ever revenue and PAT for FY24, with revenue amounting to INR37,456 crores, reflecting an 11% growth.
- The company saw a significant improvement in EBITDA margin, which increased to 14.3% in Q4 FY24, up by 130 basis points from the previous year.
- Hero MotoCorp Ltd (BOM:500182) launched the highest number of new products in a single year, including significant entries in the premium segment.
- The company's parts, accessories, and merchandise business grew by double digits, doubling its revenue size over the last three to four years.
- Hero MotoCorp Ltd (BOM:500182) expanded its EV infrastructure to over 180 dealers and 120 cities, indicating a strong push towards electric mobility.
Negative Points
- Despite strong financial performance, Hero MotoCorp Ltd (BOM:500182) still faces challenges in increasing its market share, particularly in the premium and 125cc segments.
- The company acknowledged that the impact of spend on the EV business reduced the overall EBITDA margin by 130 basis points.
- There are concerns about the sustainability of margins given the ongoing investments in new product launches and brand building.
- Hero MotoCorp Ltd (BOM:500182) is still working on ramping up production capacity for new models like the Xtreme 125, which currently has demand outstripping supply.
- The company faces uncertainties in the EV market, including regulatory changes and the need for continued subsidies to support industry growth.
Q & A Highlights
Q: How do you see Hero’s market share segmentally as well as on an overall basis moving in fiscal year '25?
A: Niranjan Gupta (CEO): We expect significant market share increases in the premium segment and the 125cc segment due to recent launches like Harley-Davidson X440, Mavrick 440, and Xtreme 125. We are also focusing on scaling up these brands and improving customer experience through initiatives like Hero 2.0 stores. Ranjivjit Singh (Chief Business Officer, India Business Unit) added that the 125cc segment, including Super Splendor and Glamour, is performing well, and new scooter launches will further boost market share.
Q: What percentage of your existing traditional stores have moved on to Hero 2.0, and what changes are you seeing in customer behavior?
A: Niranjan Gupta (CEO): Around 400 out of 1,000 primary stores have been upgraded to Hero 2.0, with plans to cover 60-70% by year-end. Ranjivjit Singh (Chief Business Officer, India Business Unit) noted that the new stores offer a premium, uncluttered look and improved customer experience, leading to better conversion rates and higher customer satisfaction.
Q: Can you provide insights on the market sentiment, especially in the rural or entry segment?
A: Ranjivjit Singh (Chief Business Officer, India Business Unit): We have observed a positive consumer sentiment driven by festivals and marriage seasons. This sentiment is broad-based across rural and urban areas, leading to increased demand in the entry-level and 110cc segments. Financing options are also playing a significant role in boosting sales.
Q: What are your expectations for the electric two-wheeler business and its qualification for the PLI scheme?
A: Swadesh Srivastava (Head - Emerging Mobility Business Unit): We are on track to qualify for the PLI scheme with upcoming product launches in the first half of this year. The current VIDA products are not PLI-ready, but the new launches will be. We expect significant growth in the EV segment this year and next, driven by new products and geographical expansion.
Q: How do you see the production and sales ramp-up for Xtreme 125?
A: Ranjivjit Singh (Chief Business Officer, India Business Unit): Xtreme 125 has been well-received, and we are ramping up capacity to meet demand. Currently, we are selling around 10,000 units per month, and we aim to increase capacity to 1,000 units per day by June-July, which will allow us to meet higher demand.
Q: What is the outlook for the ICE scooter business, especially with the upcoming Xoom 125 and 160 launches?
A: Ranjivjit Singh (Chief Business Officer, India Business Unit): Xoom 110 has performed well, gaining market share in a declining segment. We are introducing Xoom 125 and 160, along with refreshes for existing models, to further strengthen our position in the scooter market. The Xoom 110 has received multiple awards, indicating strong customer acceptance.
Q: What are your plans for the international business, especially with the new subsidiary in Brazil?
A: Niranjan Gupta (CEO): We are focusing on the top 10 big markets and are prepared to develop new products if required. For Brazil, we have tested our current product range with positive feedback and will initially launch with these products. We are also exploring new market entries and distributor changes in other regions to drive growth.
Q: What is the impact of EV margins on the overall business, and how do you plan to manage it?
A: Niranjan Gupta (CEO): The long-term margin guidance remains at 14-16%. The focus is on reducing BOM costs and building a portfolio mix of premium, mid, and affordable EVs. We believe subsidies will be required for a longer period to support the industry, and we will continue to invest in EV infrastructure and product development.
Q: Can you provide details on the spare parts business and its growth potential?
A: Niranjan Gupta (CEO): The spare parts business has shown double-digit growth and has significant runway for further expansion. We are focusing on accessories, merchandise, and new product introductions to drive growth. Ranjivjit Singh (Chief Business Officer, India Business Unit) added that investments in GPC 2.0 and new product lines like tyres and bike care products are contributing to this growth.
Q: What are your CapEx and cash position plans for FY25?
A: Niranjan Gupta (CEO): The CapEx guidance remains between INR1,000 crores to INR1,500 crores, including investments in GPC 2.0. Our balance sheet is strong, and we continue to manage working capital efficiently, leading to a robust cash position.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
