InvestorQ : Why did the profits of Hero Moto dip so sharply in Jun-20 quarter?
Arusha Ray made post

Why did the profits of Hero Moto dip so sharply in Jun-20 quarter?

Answer
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diksha shah answered.
1 month ago


As expected, it was a tough quarter for Hero Motors in the June quarter due to the COVID impact. In fact, Hero Moto reported 95% fall in net profit profits at Rs.61 crore for Jun-20 quarter. Even on the top line front, the total revenues were down 63% at Rs.2972 crore.

One good feature was the control on expenses. Despite the sharp fall in revenues, net profits managed to hold its head above water purely due to the 57% cut in total expenses. EBITDA margin or the operating margin also fell to 3.6% for the quarter.

The focus of the company will now shift more to the outlook than what has already happened. The company has pointed out that if it had not been for the fixed costs during the lockdown period then the EBITDA margins would have been closer to 12%.

The good news is that for Hero Moto, sales for the month of July were already at 95% of pre-COVID sales and hence Sep-20 quarter could be better. However, it may have a bigger challenge on the operating margin issue, which has been a price dampener.