Hero MotoCorp Ltd Q4 2024 Earnings Call Transcript

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

Question: Amyn Pirani - JP Morgan - Analyst : Yes. Hi, thanks for the opportunity, and congrats on a good set of margin performance in a seasonally weak quarter. My first question is on, how do you see Hero's market share segmentally as well as on an overall basis moving in fiscal year '25 because fiscal year '24, as you rightly mentioned, was the year of a lot of launches, many more than what we have seen Hero do in a single year? So how should we think of market share on an overall basis and segmentally because while overall growth and margins have been strong? Market share is still something which where, I think, even you would expect a better print?

Question: Amyn Pirani - JP Morgan - Analyst : Thanks for that. Just a follow up. Could you also mention what percentage of your existing traditional stores have moved on to Hero 2.0, and if there are any early trends, after you had this new kind of a lineup and the Hero 2.0 stores have grown? Any kind of change that you are seeing in the kind of customers who are walking in and the kind of interests which is generating, if you have done any study on that?

Question: Amyn Pirani - JP Morgan - Analyst : Thanks for that. I'll come back in the queue for more questions.

Question: Gunjan Prithyani - Bank of America - Analyst : Yeah, hi. Thanks for taking my questions. Two questions from my side. Firstly, on the market, April, like you flagged it, did seem like a very strong month for the industry as well as Hero. So any change in market sentiment that you have observed, the little bit of festivity, marriage season on the rural or the bottom of the pyramid so to say? Anything that you can share around the market at the lower end of the segment or entry segment?

Question: Gunjan Prithyani - Bank of America - Analyst : So if you were to hazard a guess, let's say for the industry, would you think a double digit volume growth is still feasible this year given that we still got more to do from a cycle recovery perspective sentiment is positive. Do you see that possibility in fiscal '25, double-digit volume growth?

Question: Gunjan Prithyani - Bank of America - Analyst : Okay, got it. The second question is on the new launches, Harley, Karizma, Mavrick. All three of these put together, we had a certain volume expectation. Roughly 10,000 is what we were earlier talking about between Karizma and Harley. So with Mavrick coming through, how do we see that shaping up because at least the recent month numbers have been a little bit lower than expectations. So anything that you can call out from demand, order book, capacity that gives us comfort on the scale up of these models.

Question: Gunjan Prithyani - Bank of America - Analyst : And these are all only on the 400 stores which are Hero 2.0 right, just to be clear? So reach will also increase for these models?

Question: Kapil Singh - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Yeah, good afternoon. Congratulations on a great performance. Just wanted to confirm the reach for Harley, Karizma, and Mavrick. What is it currently in terms of number of stores and where will it get to?

Question: Kapil Singh - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : So Karizma and Mavrick are being sold through Hero 2.0, and Harley is being sold through Premia and exclusive Harley dealerships, is that correct?

Question: Kapil Singh - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Understood. And now the supply constraints are resolved, so we should start to get into the ramp-up phase?

Question: Kapil Singh - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Okay, understood. Just one questions sir on financials as well. We saw a good improvement in gross margins this quarter, so if you could just call out both movement in terms of commodity cost, pricing increases in Q4, and thereafter and also, spares revenue for the quarter?

Question: Kapil Singh - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Sure, sir. Sir, can we at least give the price increases we have taken on average in Q4 and in Q1?

Question: Kapil Singh - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Thanks, and best wishes.

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : Hi, good evening and thanks for taking my questions. My first question is on the electric two-wheeler business, just trying to understand when we expect to be qualified on our products in the market for the PLI scheme.

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : Got it. So, just to clarify, our VIDA product is already eligible for PLI scheme incentives, is that the correct understanding?

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : Got it. That's helpful. My second question is on the ICE scooter business, we've had Xoom 110 in the market for more than a year now, was off to a pretty good start. Post the festive season seems to be normalizing a little bit in terms of run rate. So just trying to understand, is there any supply related issue there or is there something conscious that we are doing ahead of the Xoom 125 and 150 launches?

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : Got it. That's helpful and just lastly housekeeping question, if you can share the export revenues for the full year, please.

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : Sure, Thank you so much and all the best.

Question: Jinesh Gandhi - Ambit Private Limited - Analyst : Yeah, hi. My question is on, how are the growth trends we are seeing when we talk about very positive consumer sentiment in March till now, and it is for May, June, April. So with very broad based now, unlike in the past, is rural also doing equally well as urban or that is not yet the case?

Question: Jinesh Gandhi - Ambit Private Limited - Analyst : Okay. So, you are seeing some signs of coming back of first-time buyers, particularly in the 100cc motorcycle segment as well? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 08, 2024 / NTS, HROM.NS - Q4 2024 Hero MotoCorp Ltd Earnings Call

Question: Jinesh Gandhi - Ambit Private Limited - Analyst : Yeah, good to know. Second question is on our product portfolio. So we have seen a substantial addition in the last 12 months and in first half after launch of Xoom 125 and 160. Will it be fair to say that we would be broadly covering 100% of the ICE two-wheeler market post the upcoming two scooter launches?

Question: Jinesh Gandhi - Ambit Private Limited - Analyst : In terms of the product launches of the whitespaces in our product portfolio today and post the Xoom 125, 160 launch, would we be largely plugging all the gaps, or you see more gap and more opportunity to launch one on the ICE two-wheeler side?

Question: Jinesh Gandhi - Ambit Private Limited - Analyst : Sure. And lastly, on the finance penetration, so what it is now for Hero and what is the contribution from Hero Fincorp, that's my last question. Thank you.

Question: Jinesh Gandhi - Ambit Private Limited - Analyst : Thanks. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 08, 2024 / NTS, HROM.NS - Q4 2024 Hero MotoCorp Ltd Earnings Call

Question: Raghunandhan NL - Nuvama Wealth - Analyst : Thank you, sir, for the opportunity. Xtreme 125 has seen very good reviews and acceptance. Currently, the monthly volume is around 10,000 to 12,000 per month. How do you see the production sales ramp up? By when do you expect volumes to increase to 20,000 or higher?

Question: Raghunandhan NL - Nuvama Wealth - Analyst : Thank you, sir. That's very helpful. Sir second question on VIDA. So given that H1 is likely to see more launches, and especially in the affordable and mid-size category and you are also expanding the presence in number of cities, can you talk about expectations of how you would see the two-wheeler electric volume, production sales ramp up FY25, '26? How do you see the industry acceptance and ramp up market share for your company? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 08, 2024 / NTS, HROM.NS - Q4 2024 Hero MotoCorp Ltd Earnings Call

Question: Raghunandhan NL - Nuvama Wealth - Analyst : Thank you, sir. Just a last question. Exports have seen good improvements in recent months, any thoughts on how do you see the outlook for FY25?

Question: Raghunandhan NL - Nuvama Wealth - Analyst : Thank you, sir. Best wishes.

Question: Arvind Sharma - Citigroup Global Markets India Pvt Ltd - Analyst : Hello, good afternoon, sir, and thank you for taking my question. First question would be on the margins part. You made a comment on the impact of EV margin. So given the 14.3% blended margin, it's a 130 basis points impact. So ICE margin was 15.6%, is that understanding correct?

Question: Arvind Sharma - Citigroup Global Markets India Pvt Ltd - Analyst : Okay, great thank you sir. Sir, secondly, stake on the margins. Given that you have got quite a few EV launches and are working on the cost consideration, what blended margins would be sustainable. I know you don't give forward guidance, but should EV start being at least neutral if not massively negative on the margins front going forward with the new products coming in?

Question: Arvind Sharma - Citigroup Global Markets India Pvt Ltd - Analyst : Thank you so much sir and just one more thing if possible, can you please share the bookings for Xtreme 125? Is it possible to share the unit bookings?

Question: Arvind Sharma - Citigroup Global Markets India Pvt Ltd - Analyst : Thank you so much for taking my questions, sir. That's all from my side.

Question: Pramod Amthe - InCred Capital - Analyst : Yeah, thanks for the opportunity. First thing is with regard to the EV launches. When you are planning to launch two new products, how are you looking at the subsidies arena? Do you feel the lower subsidies is the norm of the day and hence you have to launch much lower battery size to fit into that cost or you feel product expectations are still high in the customer level and headwinds will be there?

Question: Pramod Amthe - InCred Capital - Analyst : Sure. And the second question is with regard to the consolidation which is happening within the EV space. Considering your experience in Ather investment, do you see any opportunity in terms of doing the investments in keeping the startups still, especially to get any of the product technologies or you feel it's more of a supply chain game and hence for incumbent like you, there is no more scope of participating in M&A? Just a thought on that.

Question: Pramod Kumar - UBS AG - Analyst : Yeah, thanks a lot for the opportunity. And this is related to the Xtreme 125 launch because given the traction what you are seeing on the product and all the other new launches, ideally we should have seen some market share gains reflecting in the Vahan database. But what we are seeing is that we continue to see market share erosion on a YoY basis, even on a sequential basis. I am just trying to understand, while the products are really good and is a big change from what we have done in the past, but are we losing out a lot because of cannibalization within the portfolio or what is happening which explains the market share erosion? And the related question to that is in terms of marketing spent because at least, me personally, I haven't seen much of ad campaigns from Hero on the new products except for the Mavrick. So what is the game plan on the marketing investment side going forward?

Question: Pramod Kumar - UBS AG - Analyst : Thanks, Niranjan. And Niranjan, spare parts contribution how should we look at it next year? Should the proportion be stable at around 14.5% or thereabout or you expect there's more runway in terms of the penetration, in terms of overall revenue, is it growing higher for FY25?

Question: Pramod Kumar - UBS AG - Analyst : And then the final one on CapEx , cash position and investment plans for FY25. Sorry if I missed it earlier, but it you can just refresh on that? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 08, 2024 / NTS, HROM.NS - Q4 2024 Hero MotoCorp Ltd Earnings Call

Question: Amyn Pirani - JP Morgan - Analyst : Yes, hi. Thanks for the opportunity again. I just wanted to ask about this announcement of Brazil capacity that you have talked about. It's quite interesting because, I think, the mix in Brazil is very different from the traditional export markets for Indian two-wheelers is what we understand. The mix is more premium. So should we expect more export driven launches on the premium side for you or you will be using the existing portfolio to try and capture volumes in the Brazil market?

Question: Amyn Pirani - JP Morgan - Analyst : Great. Thanks for that.