Hero MotoCorp Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Hero MotoCorp Ltd (HEROMOTOCO) Q1 FY23 Earnings Concall

Management Update:

• HEROMOTOCO said it remains positive about the prospects of the economy in general and particularly auto industry.

Q&A Highlights:

• Jinesh Gandhi of Motilal Oswal asked about demand in the context of ground level retail trend. Niranjan Gupta CFO replied that the demand environment in 1Q23 has been better than 4Q22. In 1Q23, retail was better than wholesale. In 2Q23, the whole industry is building stock. As of now the momentum is in the right direction with all the consumption spending happening.

• Jinesh Gandhi of Motilal Oswal enquired about the commodity cost inflation in 1Q and 2Q and price increases taken. Niranjan Gupta CFO answered that commodities inflation saw a spike in 4Q22, post that there was a softening in aluminum and steel which will reflect in coming quarters. The company took a price increase of INR800 in 1^st April, and INR1,200 in 1^st July, ex-showroom.

• Kumar Rakesh with BNP Paribas asked about temporary employee headcount being high of around 70%. Niranjan Gupta CFO clarified that the solution is to increase the topline which is what the company is focused on than adjusting the employees.

• Kapil Singh from Nomura Group asked about the future of exports business.  Niranjan Gupta CFO replied that on exports, the company expects exports to move up in 2H. However said, target is to continue building scale, the right products and get the right percentage of revenue in the portfolio from global business.

• Kapil Singh of Nomura Group enquired about the growth for scooters. Ranjivjit Singh CGO answered that scooters business launched some new products in 1Q23. Going forward, the company expects to see more action in the 110 cc segment. Also said that the company will be bringing in some new stuff in 2Q23 for the festival season.

• Kapil Singh from Nomura Group asked that from which month sales will start for EVs. Swadesh Srivastava Head, Emerging Mobility Business replied that the company will be launching its EV products in the festive season. And on that date, the company will be announcing the dates for dispatches across the launch cities.

• Pramod Kumar of UBS Group queried about the margin levels, if it would improve with commodity prices easing and volume recovery happening. Niranjan Gupta CFO answered that as commodity prices are easing, it ensures the company has more opportunities for pricing to go ahead of cost. Additionally, as volumes picks there will be operating levers.

• Pramod Kumar of UBS Group asked about the inventory level and the target. Swadesh Srivastava Head, Emerging Mobility Business replied that the inventory levels are typically between the 6-8 weeks kind of range depending on the month. At June end it came down to 6-7 weeks and the company will be building it up going forward.

• Pramod Kumar of UBS Group also asked about the market size of UP, Bihar and Madhya Pradesh for Hero Motors as a company. Swadesh Srivastava Head, Emerging Mobility Business replied that these are the bigger markets and they will continue to be so.

• Chirag Shah with Edelweiss Securities asked about the effective stake in Ather currently. Niranjan Gupta CFO answered that the effective stake in Ather, accounting for the full dilution of any of the ESOPs, MSOPs, etc., the net is around 35%.

• Rishi Vora from Kotak Securities enquired about the replacement mix for the industry. Ranjivjit Singh Chief Growth Officer answered that it’s something that’s coming back and the company is playing a role as a market leader.