Hero Honda Fourth-Quarter Profit Jumps 49 Percent as Motorcycle Sales Rise

Hero Honda Motors Ltd., India’s biggest motorcycle maker, reported a better-than-estimated 49 percent increase in fourth-quarter net income as sales climbed.

Profit totaled 5.99 billion rupees ($134 million) in the three months ended in March from 4 billion rupees a year earlier, the company said in a statement today. That topped the 5.5 billion rupees median profit estimate from a Bloomberg survey of 22 analysts. Sales grew 20 percent to 41 billion rupees.

Sales of motorcycles including Splendor and CBZ gained 19 percent in the last quarter as economic growth and higher disposable incomes boosted spending in the south Asian nation. New Delhi-based Hero Honda plans to build a fourth factory to add to its 5 million capacity as two wheeler demand gains in the world’s second-largest market for motorcycles and scooters.

“Motorcycle is a basic transportation need for people in India and the industry would continue to grow this year,” said Mahantesh Sabarad, a Mumbai-based analyst at Fortune Equity Brokers India Ltd.

Hero Honda, 26 percent owned by Japan’s Honda Motor Co., the world’s largest motorcycle maker, fell 1.4 percent to 1,896.40 rupees in Mumbai today. The shares have gained 15 percent this year.

Hero Honda sold 1.19 million motorcycles and scooters in the last quarter. In the financial year ended in March, sales gained 24 percent to a record 4.6 million.

The company’s operating profit margin, or earnings before interest, tax, depreciation and amortization expressed as a percentage of sales, was 17.2 percent in the quarter, according to the statement. Hero Honda will pay a final dividend of 30 rupees a share.

The company is considering a plant that can make 2,000 units daily as it seeks to boost sales in rural areas, where about seven of ten Indians live, Managing Director Pawan Kant Munjal said last month. Hero Honda expects to sell 50 percent of its motorcycles in villages in the next three to five years, from about 40 percent now, he said.

India’s $1.2 trillion economy may grow 7.5 percent in 2010, the fastest pace after China among the major economies, according to the World Bank.

To contact the reporter on this story: Vipin V. Nair in Mumbai at Vnair12@bloomberg.net.

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