Strong Quarter for Hero
- 07th February 2025
Aaj Ka Bazaar
The US major indices reported net gains on Wednesday after pessimistic sentiments driven by weak corporate earnings were countered by mixed economic data. Amongst the three indices, gains on the Nasdaq were capped on account of the dull earnings of Alphabet, which further raised questions on AI and its ROI amidst the heightened competitive landscape. The Asian peers also continue to hold their ground, with Nikkei and Hang Seng both recording modest gains as the markets continue to track US optimism. On the domestic front, GIFT Nifty indicates a flattish start with a positive bias. We expect the market to be firm, buoyed by positive global market sentiments.
Markets Around Us
BSE Sensex –77,977.28 (-0.10%)
Nifty 50 – 23,576.65 (-0.11%)
Bank Nifty – 50,367.20 (-0.03%)
Dow Jones – 44,748.82 (0.00%)
Nasdaq – 19,786.70 (0.48%)
FTSE – 8,727.28 (1.45%)
Nikkei 225 – 38,838.46 (-0.59%)
Hang Seng – 21,182.72 (1.39%)
Sector: 2/3 Wheelers
Hero MotoCorp Ltd. Q3FY25
Hero MotoCorp Ltd. reported healthy quarterly performance, beating market estimates on profitability counts. Although the overall revenue growth was modest, this was largely anticipated given the sluggish sales volumes during the quarter. The introduction of the Xtreme 125 has partially mitigated the decline in the 110cc segment. The company’s focus on premiumization is positively impacting profitability and is further supported by strong growth in exports. With the recent launches of the Xtreme 250R and Xpulse 210 motorcycles, as well as the Xoom 125 and Xoom 160 scooters, Hero MotoCorp is bolstering its premium motorcycle lineup, improving average selling prices (ASPs) and margins. Additionally, the company is expanding its presence in the scooter segment to leverage the increasing trend of urban mobility. Moving forward, the company is poised for dynamic changes, including plans to spin off its electric vehicle (EV) business and leadership transitions. These changes are expected to bring fresh perspectives and drive innovation. The recent changes in the income tax structure in the budget is likely to boost consumer confidence, especially in rural areas, coinciding with the conclusion of the Rabi sowing season by the end of February, which further bolsters our expectations of an improved demand environment.
Why it Matters:
Hero MotoCorp Supported by strategic initiatives and a continued focus on product innovation, Hero MotoCorp is well-positioned for sustained growth in the upcoming quarters. Management’s insights on demand outlook, the positioning of new releases, and the future pipeline will be key.
NIFTY 50 GAINERS
BHARTIARTL – 1703.00 (5.14%)
ULTRACEMCO – 11677.00 (1.74%)
SHRIRAMFIN – 575.85 (1.68%)
NIFTY 50 LOSERS
BEL – 276.50 (-1.16%)
CIPLA – 1457.25 (-0.97%)
ITC- 432.80 (-1.88%)
Secto: FMCG
ITC Ltd Q3FY25 Result Net profit drops
ITC Ltd. posted a resilient performance in Q3FY25, benefitted by recovery in rural consumption even during challenging period where the company faced issues like economic slowdown due to low urban consumption and rising input cost impacting the company’s margins. The company improved its market position through strategic product differentiation and premiumization. The FMCG cigarette segment showed resilience amid rising costs. On the other hand, the FMCG non-cigarette sector faced challenges primarily due to inflationary pressures and growing competition. The agri business experienced significant growth, driven by leaf tobacco and value-added products, although margins were affected by rising costs. However, the boost to the economy by the government during the recent budget suggest a positive outlook for consumption demand especially in the premium category in the near term. Further, the company has demerged its hotel segment with effect from 1 January 2025 and it has been reported as the ‘Discontinued Operations’ in the Q3FY25 financial results. Post-demerger, ITC will focus on its core cigarette and FMCG businesses, benefiting from a more asset-light structure, improving capital efficiency and returns. This shift is expected to improve ITC’s return ratios substantially and improve profitability, thereby offering an attractive long-term upside. With focus on consumer centricity, purposeful innovation, agility and execution excellence, the company remains confident of navigating the short-term challenges and creating sustained value for all stakeholders.
Why it Matters:
Implementation of several strategic cost management initiatives in areas such as supply chain optimization, smart procurement and productivity improvement through automation and leveraging new-age technologies, the company is set to maintain its market leadership position and deliver consistent growth for the coming period.
Around the World
Asian currencies remained mostly unchanged on Friday, while the U.S. dollar held steady ahead of key job market data that could influence interest rate decisions. The Chinese yuan stayed weak near 7.3 per dollar after reopening from the Lunar New Year holiday. The Japanese yen had a strong week, dropping 2.3% against the dollar on expectations that the Bank of Japan will raise interest rates further. Investors are closely watching U.S. nonfarm payrolls data, which could impact the Federal Reserve’s stance on interest rates. A strong job report may delay rate cuts, putting pressure on Asian markets. The Indian rupee hovered near record lows amid expectations of a rate cut by the Reserve Bank of India. The Australian dollar showed slight recovery from a recent five-year low, while the Singapore dollar and South Korean won also made small gains. Markets remain cautious due to ongoing U.S.-China trade tensions.
Option Traders Corner
Max Pain
Nifty 50 – 23,600
Bank Nifty – 50,400
Nifty 50 – 23,644 (Pivot)
Support – 23,515, 23,427, 23,297
Resistance – 23,732, 23,861, 23,949
Bank Nifty – 50,361 (Pivot)
Support – 50,170, 49,958, 49,766
Resistance – 50,573, 50,765, 50,977
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