Hero MotoCorp Ltd (HEROMOTOCO) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (PhillipCapital (India) Private Limited): Ladies and gentlemen, good day, and welcome to Hero MotoCorp Limited Q2 FY '27 Earnings Conference Call, hosted by PhillipCapital (India) Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is now being recorded. I now hand the conference over to Mr. Amit Hiranandani from the PhillipCapital (India) Private Limited. Thank you, and over to you, sir.
Amit Hiranandani (PhillipCapital (India) Private Limited): Thank you and good morning, everyone. Welcome to the Q2 FY '27 post results conference call of Hero MotoCorp. I would like to thank the management team of Hero MotoCorp for giving us the opportunity to host this call. I will now hand over the call to Mr. Nitin Vaid, who recently joined as Head of Investor Relations team of Hero MotoCorp, to take this forward. Over to you, Nitin.
Nitin Vaid (Hero MotoCorp Ltd): Thank you, Amit. And it's an absolute pleasure to be hosting my first earnings call for Hero. Good morning, everyone, and welcome to the second quarter fiscal year ended March 31st, 2027 earnings call. We put out a press release and an earnings presentation announcing the results yesterday. A copy of the press release and the earnings presentation is now available in the Investor Relations section of our website. With us on the call today are Mr. Harshavardhan Chitale, our CEO; Mr. Vivek Anand, our CFO; Mr. Ashutosh Varma, Chief Business Officer, India Business Unit; Ms. Koushalya Nandakumar, Chief Business Officer, Emerging Mobility Business Unit; and Mr. Alok Dua, Chief Business Officer, Premium Business Unit. Please note that our safe harbor statements are contained within our presentation and other materials available on our website. These statements are important and integral to all our remarks. We will begin the call with opening remarks from Harsh and Vivek, followed by a Q&A session. And with that, let me hand over to Harsh.
Harshavardhan Chitale (Hero MotoCorp Ltd): Thank you, Nitin, and welcome to Hero MotoCorp. Good morning, everyone, and welcome to this earnings call.
Harshavardhan Chitale (Hero MotoCorp Ltd): Now, before I begin with our prepared remarks on our business and financial highlights, I would like to wish you all and your families a very happy and prosperous Diwali in advance and to those of you who are also celebrating Karwa Chauth, best wishes on Karwa Chauth. We ended H1 FY '27 with a strong revenue growth of 28% and profit after tax growth of 16% YoY. And Vivek will deep dive further into our financial performance for Q2 as well as H1, both stand-alone as well as consolidated in detail. Let's begin with what we see happen in the industry as a whole. Q2 was another strong quarter for the two-wheeler industry with VAHAN retails growing by over 27%. ICE grew 23% and EV at 82%. Growth continued to be broad-based. And since this question gets asked often and it's very topical right now, we see growth both in urban and rural markets. And when I look at HMCL performance, actually our rural performance is equal or better than the urban performance last quarter as well as in this quarter, quarter-to-date. For H1 FY '27, this industry growth translated also into strong retail growth of over 20% YoY. And for those of you who want to understand the impact of pent-up demand of GST, what was the impact of that, to take that impact away, we also looked at what was the growth over 2-year period. And over 2-year period, it was a 11% CAGR, which shows that industry as a whole has a healthy growth momentum even after discounting the impact of a pent-up demand. With the festive season underway, we do see demand fundamentals continue to hold up, and we expect the industry as a whole to deliver mid- to high-single-digit growth during the festival period, and we are seeing that already in the festival-to-date performance. Let's now move to Hero MotoCorp's operational performance. We continue to execute on our key pillars of our business strategy of expanding market share in fast-growing segments of the two-wheeler industry. And I'm happy to report that with that execution, we gained VAHAN market share in our ICE portfolio every month of the last quarter. So in all the three months, every month, we gained VAHAN share. Our ICE retails outpaced industry growth, recording a strong growth of 24% year-on-year during the quarter. Now let me highlight some key drivers behind this performance. Scooter was a big contributor of this growth, and scooter portfolio continued to gain traction with fifth quarter of year-over-year expansion in our market share. In some of the key markets of South, for example, which is a big scooter market, our ICE scooter market share has now crossed 10% level, and we are scaling our products to other regions rapidly. Our ICE scooter dispatches have grown 34% year-on-year in quarter two. And for the full half year, the dispatch growth has been in excess of 50%. If you look at how the business mix of scooters has grown over last 2 years, for the corresponding quarters, when you compare them, our scooters as a mix has now increased by 3 percentage points in our entire business mix. Moving to 100 cc motorcycles, and this is also a question we get quite often that you have a large exposure as a company to this category, how is this category doing, is it underperforming versus the rest? In quarter two, we see 10% growth in 100 cc as a whole, and in H1, we have seen 11% growth. So this category also continues to expand and contribute to our business performance. Splendor has grown at over 20%. And what's also interesting to note is Splendor's XTEC variant, which is the premium variant of Splendor, now contributes to over 25% of Splendor volumes. Moving to our EV portfolio, retails in our VIDA grew by 105% year-on-year. And we've gained 170 basis points market share in H1 of FY '27. Earlier this fiscal, we had launched new variants of our VIDA, the VX 2 Go 3.1 kWh and VX 2 Plus 4.4 kWh, and both of these products are bringing new set of customers in our dealerships. We've also expanded our capacity to 30,000 units per month in September, and just to remind everyone, we were at 15,000 units per month at the start of the year. So we've doubled that capacity in six months. In terms of distribution, we have now crossed 400 cities and close to 800 touch points.
Harshavardhan Chitale (Hero MotoCorp Ltd): at the end of last fiscal. So, we've already doubled the capacity and we are well on our way to take it to 45,000 units a month in quarter four and looking at the demand that we see, we've already started further expansion as well, which will take our capacity to over 80,000 units a month by quarter two of next financial year. Our dealer inventory continues to be low. We are working with a dealer stock of just about one day, which shows that actually we are still capacity constrained and there is a strong demand for our product even during this festival period. Let's move to parts business. Our parts business recorded a revenue growth of 27% year-on-year during this quarter. So, this is a second quarter in a row where we see growth in excess of 25%. And as you all know, this is a big contributor of our profitability. Growth was driven by increasing volumes in our EV portfolio for parts, Harley-Davidson portfolio for parts, as well as accessories, as well as parts and accessories performance also in our exports. Looking at this growth momentum in our parts and accessories business, we announced the greenfield expansion of our Global Parts Centre 2.0 to cater to parts availability for both Indian and global markets. And we are investing over 700 crores in setting up a complete new automated parts centre and double our parts handling capacity from what it is right now. Moving to global business. This is one business where we did face some logistical challenges in some of our key markets. We have a very high exposure to one of the Latin American country, which unfortunately faced a devastating earthquake this quarter. And we did have issues in dispatches and custom clearance in that market. We also saw a demand slowdown in Bangladesh with sharp increase in fuel price due to the gulf war that's ongoing. And both of them did impact our dispatch or wholesale growth in exports. However, we are enthused by the fact that our retails have grown by 19% during this period. So, the retail momentum is strong, is the logistial challenges that came in our way of dispatch growth. However, we are confident to move back to dispatch growth or wholesale growth even in our exports in Q3. Moving to a premium portfolio. As you all know, we carved out a premium business unit in quarter two and we announced a new Chief Business Officer for this business unit, who is also on this call and could answer some of the questions later in the Q&A. Under the new organizational set up, we've recently launched two key product refreshes in October: Xtreme 160R and Xtreme 250R. And both of these motorcycles are the fastest in their respective segments and come with a host of segment-first features. Our XPulse franchise within this portfolio continues its strong growth trajectory, recording over 30% retail growth in the first year, in the first half of FY27, and market share of over 35% in the adventure bike segment. We will continue to address the white spaces in our premium portfolio through further launches and you can look for three to four key launches in the remaining parts of this financial year in our premium segment. So, in summary, overall we are encouraged by the results that we are seeing in our and the performance across our various strategic initiatives and our focus on fast-tracking execution across each growth vertical. We will continue to invest in new products behind our key brands and in capacity expansion. With that, I will hand over to Vivek to walk us through our margin performance, cash flow performance, and so on. Vivek, over to you.
Vivek Anand (Hero MotoCorp Ltd): Thank you, Harish. Good morning everyone, and thanks for joining our Q2 FY27 earnings call. Let me start by extending festive greetings to all of you and your families. I trust all have reviewed our financial statements and the investor presentation. Let me walk you through the financial performance for the quarter. So starting with financial highlights, our headline number for Q2 reflects strong top-line performance with revenue from operations at Rs 14,687 crores,
Vivek Anand (Hero MotoCorp Ltd): strength in the underlying demand trends across both urban and rural markets, as we prepare for the ongoing festive season. Revenue continue to outpace volume growth at 21% versus 10% 10.5% wholesale growth. This outperformance reflects portfolio premiumization led by an increasing share of ICE and EV scooters, and premium variants contributing a 5% positive mix impact, equally supported by calibrated pricing. Moving on to cash flow from operations in the quarter stood at ₹2,159 crores, nearby doubling over the prior comparable period driven by optimization of working capital. Within working capital, I think we had record receivables in the previous quarter, record low receivables in the previous quarter. Moving to the consolidated results, revenue for the quarter increased by 23% year-on-year to ₹14,971 crores, and PAT grew by 41% year-on-year to ₹1,861 crores. Results for the quarter include a ₹397 crore one-time gain from the equity consolidation of an associate company, following its capital raise via a QIP and private placement. I'll move on to margins and cost management now. During quarter two, the industry continued to face headwinds from broad-based commodity inflation. As you know, it was across steel, aluminum, plastic, rubber, and freight, which was further amplified by currency depreciation. To mitigate these cost headwinds, we continued on our four-point action plan. Firstly, as you can see in our presentation, our mix now has a higher share of premium variants, supported further by strong revenue growth in our parts, accessories, and merchandise business. Secondly, we accelerated savings under our Leap program, continue to curtail discretionary spending, and drive operating leverage. Thirdly, judicious pricing across select models in select markets. And finally, we worked aggressively on improving the unit economics of our EV portfolio, and I'm happy to report that our Vida business turned gross margin positive in the quarter. This was achieved ahead of our earlier guidance. At an aggregate level, while gross margin compressed by 30 basis points quarter-on-quarter, strict overhead control and operating leverage drove a 10 basis points quarter-on-quarter expansion in EBITDA margins to 13.4%. I'll briefly just talk about the EMBU business now. Our Vida business maintained stock of strong operational momentum, with retail volumes rising 74% year-on-year to 66,000 units in the quarter. This was supported by our monthly production ramp-up to 30,000 units in September and portfolio diversification across broader price points. Vida business continued to improve on unit economics, resulting in business becoming gross margin positive during the quarter. This led to ₹70 crores optimization of spends over the previous quarter. This was again possible through series of initiatives, structured BOM cost optimization, healthier margin across our new product launches, acceleration of non-vehicle and software revenue streams, judicious price increases across the portfolio, and PLI accruals amounting to ₹63 crores recognized during the quarter. Approximately 70% of our EV portfolio got PLI in the quarter, and I'm happy to report that we have already received PLI certification for nearly 100% of our portfolio in October '26. I'll move on to capex now. Turning to capital expenditure, we remain on track with our full-year guidance of ₹1,500 crores. In H1, we've already deployed close to ₹600 crores towards our key projects. We've already expanded our capacity in Splendor and have doubled our ICE scooter capacity to 80,000 units per month. Our EV capacity is also being increased to run-rate of 30,000 per month, and we are actively working to scale our production further to 45,000 by quarter four. We've also expanded the dedicated premium assembly line at our Neemrana facility. We are advancing the phase two expansion of our Global Parts Center 2.0 at Tirupati and expect the GPC 2.0 to be fully operational by end of next calendar year. Looking ahead to quarter three FY '27, due to extended West Asia conflict and sustained commodity price inflation,
Vivek Anand (Hero MotoCorp Ltd): neutralize these through continued cost rationalization, accelerated leaf savings program, aggressive improvement in Vida unit economics and judicious price actions. Backed by these measures, we expect margins in quarter 3 to remain stable. Over the medium term, our primary focus remains driving EBITDA growth while steadily progressing towards our target EBITDA margins corridor of 14% to 16%. Going forward, our journey of investment behind growth will continue, both in terms of capacity expansion and brand building to support our premium, scooter, EV, and global business portfolio. Thank you once again for your time and continued support. On that note, let me open the floor for Q&A. Over to you, Nitin. Thank you.
Nitin Vaid (Hero MotoCorp Ltd): Thank you, Vivek. Anam, you may now open the floor for questions.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Amin Pirani from J.P. Morgan. Please go ahead.
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