Hero MotoCorp Ltd Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mumuksh Mandlesha - Anand Rathi Institution Equities. - Analyst : Thank you, sir, for the opportunity. Sir, firstly, you mentioned about the rural market pickup. How are you seeing demand trends in both urban and rural markets for your volumes? And is that done going into routes can do better than urban market also?

Question: Mumuksh Mandlesha - Anand Rathi Institution Equities. - Analyst : Sir, on the CNG vehicles are we are seeing in the markets and all how do you see this kind of product potential in the market and any plans for us in the medium term?

Question: Mumuksh Mandlesha - Anand Rathi Institution Equities. - Analyst : Got it. (inaudible) on the EV outlook outlet (inaudible) and will the growth be better ahead for the industry and also want to understand how the cost of manufacturing for EVs are coming down, whether related to Batteries, Motors, controllers and how much reduction benefit you are seeing for the income, the cost side, Sir? Unidentified Company Representative Hi, thanks. Thanks for the question. Yeah. You know the EV two-wheeler market in India is definitely growing. There was a dip in April because of the change to MPS, but after that recovery has been very promising and very clearly it will end up being 1 million plus market. We with our products and our network, we are pretty strongly placed take benefit of the growth in the two-wheeler industry. on the cost part, yes, we are working very aggressively and on the powertrain side to bring the cost down by technological improvements, by localization obviously by bringing scale and you will see that benefit coming out into our further launches as well as we spoke, you'll see affordable products coming out later this year and they will be at the, backdrop of these cost reductions.

Question: Mumuksh Mandlesha - Anand Rathi Institution Equities. - Analyst : Thank you.

Question: Gunjan Prithyani - Bank of America - Analyst : Yeah, hi. Thanks for taking my questions. Two questions from my side. Firstly on the ASP and the gross margin performance for this quarter, could you just help us understand what drives this 3% Q-on-Q decline? From my understanding, there was also some pricing action taken during the quarter, right? So what explains that Q-on-Q decline and how and in the current commodity set up the margins, gross margins have also come off? Any thoughts around that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 5:00AM, HROM.NS - Q1 2025 Hero MotoCorp Ltd Earnings Call

Question: Gunjan Prithyani - Bank of America - Analyst : But anything to call out from a commodity or a mix perspective, particularly at gross margin level like that, something that we should be aware of? I mean, of course, it's improvement quarter on quarter, but just the gross margin performance seems a little inferior. So just trying to get a handle on, is there any change in outlook to commodities or mix that we should bear in mind?

Question: Gunjan Prithyani - Bank of America - Analyst : Okay. Got it.

Question: Gunjan Prithyani - Bank of America - Analyst : Okay, got you. That's pretty useful. Got it. That's pretty useful. Just the second question on the Xtreme 125, congratulations on the response there. In terms of the ramp up, clearly the feedback from the dealers has been there is still limited supply. So if we were to think about how could be the volume run rate of this monthly, run rate of this and how do we see the production ramping up, through the course of the year, some colour on the numbers there and alongside while Xtreme 125 has seen a good off take, the numbers on Glamour and passion has still been very, very range bound. So you know is there anything to call out from on the ground feedback, how should that both of these models span out? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 5:00AM, HROM.NS - Q1 2025 Hero MotoCorp Ltd Earnings Call

Question: Gunjan Prithyani - Bank of America - Analyst : Got it. Right. Thank you so much. I'll join back in the queue.

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : Hi. Good morning and thank you for taking my questions. My first question is just on the good volume trajectory we've seen in wholesalers in one queue. I think we were the only company to grow wholesale double digits in 1Q quarter on quarter. (inaudible) industry was more sub 3%, sub 4% wholesale growth quarter and quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 5:00AM, HROM.NS - Q1 2025 Hero MotoCorp Ltd Earnings Call So just trying to understand heading into festive season where we are on channel inventory at this point and how we're thinking about managing that heading into the spike in industry demand seasonality?

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : And just to add to that, a follow-up for the quarter, how would you say our retails were versus our wholesales just in terms of growth?

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : Got it. That's helpful. And my second question is just related to how you're thinking about the product pipeline going forward. I think we had a strong set of product launches in terms of number of products over the past 18 months. You had the Charisma, we have Haley, we had the Maverick and the Xtreme 125. So just trying to think about, the market share stats that you give post all of these launches and then going forward, we are planning to recover some of our lost market share over the past few years with potential new products, trying to understand how you're thinking about that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 5:00AM, HROM.NS - Q1 2025 Hero MotoCorp Ltd Earnings Call

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : Got it. That's helpful. Thank you very much and all the best.

Question: Ajox Frederick H - Sundaram Mutual Funds - Analyst : Hi, sir. Thanks for the opportunity. Sir, if I adjust for the these pairs also sequentially, it seems to be down despite VIDA and Xtreme picking up very strong. And Xtreme has a higher ASP rate relative to that 125ccs. So what am I missing here sir?

Question: Ajox Frederick H - Sundaram Mutual Funds - Analyst : Sure, and sir the one 90 bps impact. Is this a onetime impact during the quarter, sir.

Question: Ajox Frederick H - Sundaram Mutual Funds - Analyst : Got it. And I'm assuming similar it would have been in 4Q also, right sir. Because we are investing at that point as well.

Question: Ajox Frederick H - Sundaram Mutual Funds - Analyst : Understood. Very helpful. congrats and all the best.

Question: Amyn Pirani - JP Morgan - Analyst : Hi. Thanks for the opportunity. I just wanted to check one thing. And while it's maybe it's still early days and on a Y-o-Y basis, adjusting for seasonality, the market share on an industry level basis for you is still coming a bit low and is still declining. So two-part question. A. Is that something that you focus on or is it more segmental market share that you're concerned about and overall market share is not something that you're targeting? And B, if you are looking at overall market share, how should we think about and what could be the drivers of overall market share also probably,

Question: Amyn Pirani - JP Morgan - Analyst : Thanks for that. So just one data point, what is the share of financing in the current quarter?

Question: Amyn Pirani - JP Morgan - Analyst : 60%. Okay. And just one last thing since you mentioned, you know that you want to revive the entry category, there should we expect like new launches or little more like refreshers and some other actions that you would take to revive that?

Question: Amyn Pirani - JP Morgan - Analyst : Thanks. Thanks for that. I'll come back in the queue. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 5:00AM, HROM.NS - Q1 2025 Hero MotoCorp Ltd Earnings Call

Question: Kapil Singh - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Good morning, sir. My question is on Xtreme 125R and VIDA, what is the reach and how much will it get to? And we have started to see some ramp-up in volumes of VIDA and so if you could elaborate, what are the actions that the company has taken that is helping this ramp-up in volumes?

Question: Kapil Singh - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Okay. That's good to hear. And how should we think about the evolution of VIDA or the EV business profitability from here on because you've talked about cost reduction. So by when can we see that benefit? Can you give us an update on where are we in the PLI journey. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 5:00AM, HROM.NS - Q1 2025 Hero MotoCorp Ltd Earnings Call And overall, sir, if you could talk about the fact that if we go from, let's say, 5,000 to 10,000 units per month then should we expect that the drag that we are getting some EV business that will start coming down?

Question: Kapil Singh - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Thank you, sir.

Question: Abhinav Ganeshan - SBI Pension Fund (P) Ltd - Analyst : Thank you for taking my questions and congrats on a decent set of numbers.

Question: Abhinav Ganeshan - SBI Pension Fund (P) Ltd - Analyst : Is this better now.

Question: Abhinav Ganeshan - SBI Pension Fund (P) Ltd - Analyst : Is it better now?

Question: Abhinav Ganeshan - SBI Pension Fund (P) Ltd - Analyst : Congratulations on a decent set of numbers. I had just two questions. So do you feel that the EV will become profitable by the next 6 to 8 quarters that is first. And second is if you can give some trajectory on how are we going to expand our export presence we've been talking about it for the last couple of years, seeing some steady progress, so if you can give some client part on the same. And also if you can break out how much is Bangladesh as a part of our exports? Thank you.

Question: Mukesh Saraf - Avendus Spark - Analyst : Yeah, good morning and thank you for the opportunity. My first question is around the rural demand, obviously, you have kind of mentioned that things are looking quite good. Just trying to understand, could you give a sense of replacement versus, say, new buyers within the rural market itself. So that you can kind of understand how and how this could kind of continue going forward?

Question: Mukesh Saraf - Avendus Spark - Analyst : Right? So the 125cc demand, is that also being largely first-time buyers? Or are there you're seeing more of a replacement.

Question: Mukesh Saraf - Avendus Spark - Analyst : Secondly, on your 2.0 stores, I don't know if I missed it. So last quarter you had mentioned 400 outlets. Where do we stand now and any kind of early feedback that we're getting from those stores in terms of customer perceptions that's the feedback from them?

Question: Jinesh Gandhi - Ambit Capital - Analyst : Hi, first question is on PLI for VIDA V1. Can you clarify whether you have applied for this and by when we will be getting certification for that?

Question: Jinesh Gandhi - Ambit Capital - Analyst : Got it. And second question is on top of your realization versus margin performance. On one side, we have seen weaker mix due to lower spare sales and about 50 basis-point impact of commodity cost inflation, but our ICE margins have gone up by about 110 basis point on Q-o-Q basis. But how do we bridge this dichotomy of weaker mix, the higher RM cost, but the term ICE margin performance? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 5:00AM, HROM.NS - Q1 2025 Hero MotoCorp Ltd Earnings Call

Question: Jinesh Gandhi - Ambit Capital - Analyst : Okay. Got it. And lastly, can you clarify what would be our CapEx and investment in R&D this year?

Question: Jinesh Gandhi - Ambit Capital - Analyst : Okay on CapEx?

Question: Jinesh Gandhi - Ambit Capital - Analyst : Got it. Thanks and all the best.

Question: Kumar Rakesh - BNP Paribas Securities - Analyst : Hi, good morning. Thank you for taking my question. My first question was on the profitability of the EV business. Sort of you talked about the operating leverage to be one of the key drivers for improving the profitability. Now sequentially from fourth quarter to first quarter, the volume almost double in the EV business, although we haven't seen material improvement in profitability. So possibly it may take much higher volume to drive profitability. So can you give some since on at what level of volume you start seeing the operating leverage to start kicking in? And as part of that is there any step function improvement as well in profitability to either new technology, which you are working on the platform or the supply side, which we would see in coming quarter? It would be a gradual improvement in profitability.

Question: Kumar Rakesh - BNP Paribas Securities - Analyst : Got it. And just a clarification on that site. So you had earlier spoken about that the expansion of portfolio and EV will be happening in the mega and affordable section, where the pricing could be a little more challenging.

Question: Kumar Rakesh - BNP Paribas Securities - Analyst : Got it, thanks. And my second question was on the EV market share. I understand market is fairly small today, so I wouldn't make a lot of sense to look at the today's market share. But from medium-term perspective, how would you see your EV market share eventually trending towards, because your scooter market share has largely been in single digit, mid to high single digit sort of number. And electrification at least in the first stage would be largely driven by scooters. So does that not create a bottleneck for you to expand your market share on how you are going to comment on that?

Question: Kumar Rakesh - BNP Paribas Securities - Analyst : Great. Thanks a lot (inaudible) for that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 5:00AM, HROM.NS - Q1 2025 Hero MotoCorp Ltd Earnings Call

Question: Pramod Amthe - Incred Capital - Analyst : Yeah, thanks for the opportunity. First question to Niranjan. If I look at your ICE margins, which is at 16%-odd and look through the history of margin profile, you are almost near to the peak margins of around 16%, 17%. So how do you look at market share versus margins at this juncture? And do you see that market share being under pressure? Is it worthwhile to deploy it and to get better market share?

Question: Pramod Amthe - Incred Capital - Analyst : And related to that also continued the buoyancy in rural. Do you see more product interventions will be a good way to look at to get the maximum (inaudible)

Question: Pramod Amthe - Incred Capital - Analyst : Sure. Thanks.

Question: Raghunandhan N L - Nuvama - Analyst : Thank you sir, for the opportunity. Just one question. Can you share the revenue for the quarter?

Question: Raghunandhan N L - Nuvama - Analyst : And at the gross margin level, what might be the loss sir?

Question: Raghunandhan N L - Nuvama - Analyst : Got it, sir.

Question: Raghunandhan N L - Nuvama - Analyst : Got it. Thank you for that.