- 24 Jun 2022
- ICICIdirect Research
HERO MOTOCORP ANNOUNCES RM COSTS INFLATION LED FRESH PRICE HIKES
HEROMOTOCO - 4724 Change: -33.30 (-0.70 %)News: The company has announced a fresh price hike across its product range up to Rs. 3,000/unit with effect from July 1, 2022. The company’s commentary suggest price hike is largely on account of commodity inflation led rise in key raw material prices
Views: This comes as a negative surprise with the company already undertaking a price hike of ~Rs. 1,000/unit starting April 2022 and witnessing a 170 bps gross margin expansion on a QoQ basis in Q4FY22, largely implying large part of raw material inflation being successfully passed on to customers as of FY22 end. Blended ASP in Q4FY22 was at ~ Rs. 62,426/unit (up 2.3% QoQ). With 2-W segment still not out of the woods with lack of definite signals of demand revival, it is very likely that the current price hike could elongate demand recovery. However, with domestic steel prices down 20% from their peak and even global aluminium prices down 25% from their peak, the sector is in a sweet spot reaping the gains of lower RM costs in times to come (albeit with a time lag)
Impact: Neutral