Hero MotoCorp Falls After Profit Misses Estimates: Mumbai Mover

Hero MotoCorp Ltd. fell to the lowest in more than four months in Mumbai trading after India’s biggest motorcycle maker posted profit that missed analysts’ estimates as competition from Honda Motor Co. intensified.

Shares of Hero dropped 3 percent to 1,764.10 rupees, the lowest level since Aug. 31, at the close in Mumbai. Third-quarter net income fell 20 percent to 4.88 billion rupees ($90 million), Hero said yesterday. That missed the 5.93 billion-rupee median of 37 analysts’ estimates compiled by Bloomberg.

Hero has introduced four new models since it parted ways with Honda, the world’s biggest motorcycle maker, two years back. The Japanese company has unveiled at least seven new models, while Bajaj Auto Ltd., India’s second-biggest motorcycle maker, has introduced at least five.

“Rising competition has definitely impacted Hero’s market share and forced them to spend more on advertising and marketing,” said Yaresh Kothari, an analyst at Angel Broking Ltd. in Mumbai. “We expect the environment to remain challenging as demand is not expected to revive in the near term.”

Shipments at Honda’s local unit surged 37 percent to 1.94 million units in the nine months through December from a year earlier, compared with a 2 percent decline in domestic deliveries at Hero, according to data from the Society of Indian Automobile Manufacturers.

Honda, which in 2010 agreed to exit a 26-year partnership with Hero, is building a third factory in the southern Karnataka state and will expand annual capacity to 4 million units in the first half of this year. Hero will spend 5.5 billion rupees on its fourth factory and a parts supply center.

The automobile industry group on Jan. 9 cut its annual demand forecast for two-wheeler sales in India, the world’s biggest market after China. Growth may slow to as little as 3 percent this fiscal year from a previous projection of a 5 percent to 7 percent increase, it said, citing high borrowing costs and a slowing economy discouraging buyers.

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