Hero MotoCorp Ltd
NSE:HEROMOTOCO
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
3 177.85
6 190.55
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Earnings Call Analysis
Q3-2024 Analysis
Hero MotoCorp Ltd
At the heart of the industry's growth engine is finance penetration, which is expected to be a major driver down to the lowest rate. To capitalize on this, the company has piloted the eFin platform that will scale up in fiscal year 2025. This year marked significant expansion for the company, with new cities and dealers added at a rapid pace. The focus is on 100-plus cities, 150-plus dealers across multiple formats, and a plan to increase Vida Hubs. This strategy aims to significantly scale up the company's presence in fiscal year 2025.
EVs are transitioning from early adopters to the early majority, who demand price parity with ICE products and uncompromised charging and service requirements. The company intends to avoid short-term price wars, focusing on long-term strategies by providing the right products at competitive prices, reinforced by cost reduction initiatives. To address this, the company will enter three different price points in the first quarter of fiscal year 2025, ensuring a fast scale-up.
The 125cc motorcycle segment continues to stimulate the overall motorcycle growth, and the premium segment, particularly models over 200cc, is driving growth. Additionally, there's a plan to broaden the parts, accessories, and merchandise business, leveraging micro distribution strategies for a forecasted double-digit annual growth. An investment has already been outlined to expand the company's capacity to a remarkable INR 10,000 crores annual revenue equivalent.
With various launches completed and more in the pipeline, the company is poised to achieve double-digit revenue growth. This growth will potentially lead to higher market share gains in fiscal year 2025.
Significant investments in R&D are being channeled towards advancements in flex fuels and batteries, ensuring market-leading technologies. The company is also optimizing its retail experience, with Hero 2.0 stores claiming faster industry ramp-ups and higher customer satisfaction compared to normal outlets, leading to higher conversions. Capabilities are being ramped up to facilitate swift scale-up in fiscal year 2025.
A combination of digital and traditional marketing is being utilized to create a unique customer journey. Alongside product launches, the company is investing in marketing to ensure success. This includes dedicated sales executives for premium and EV models, test drives, rallies, and rides as part of a comprehensive execution strategy. This all-around approach incorporates product, positioning, placement, pricing, and marketing to capitalize on every launch.
Current inventories are maintained between 4 to 6 weeks, aligning with a notable pick-up in retail demand. The company's retail market shares are higher than wholesale, suggesting efficient inventory and demand management throughout the year.
Strategic investments will prioritize the top 10 markets, including Mexico, Nigeria, Colombia, and Bangladesh, to fuel growth in these regions. A plethora of exciting products are in the pipeline, with launches expected to improve market share, particularly in the scooter segment with the introduction of 125 and 160cc models in the first half of fiscal year 2025.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Q3 and 9 Months FY '24 Earnings Conference Call of Hero MotoCorp Limited, hosted by Prabhudas Lilladher Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Himanshu Singh from Prabhudas Lilladher. Thank you, and over to you.
Thank you, everyone. Thank you, Yash. Good morning, everyone. Welcome to Q3 FY '24 Post Results Conference Call of Hero MotoCorp. I would like to thank the management for giving us this opportunity to host this call. Now I hand over the call to Mr. Umang Khurana, Head Investor Relations and Risk. He will introduce the management and take the call ahead. Over to you. Thank you.
Thank you, Himanshu. Thank you for hosting us. Good day, everyone. Welcome to the quarterly call post results investor call at Hero MotoCorp. Thank you for sharing your Saturday morning with us.
As usual, what we have today is we'll start with our CEO, Niranjan Gupta sharing an update. We also have with us today Swadesh Srivastava, our Head of EMU business. And then fronting for Ranjiv is Ashutosh Varma, our Head of Sales Nationally as well. We will open with Niranjan with his opening comments, and we'll take it from there. Niranjan, over to you.
Thanks, Umang, and welcome again, and good morning. It's a Saturday we know. But I'm sure that you will be excited seeing -- you would have been excited seeing our results, and will be more pleased as we go through your questions and our explanations on those. As you would have seen the results, we delivered a top line growth of 20% and PAT growth -- profit growth of 50%. This allows, as I've been saying earlier, our profit share now allow us to deploy more aggressively behind our growth priorities.
We also declared interim dividend of INR 100 per share, which includes the INR 75, which is normal and INR 25 as a special dividend. Coming to our -- the actions that we have been taking, and you've been seeing us -- a lot of action in the premium segment. Our early success that we have seen on Harley X440 and Karizma continues. We've launched 2 more products, as you saw in Hero World, and thank you to those who were able to come to Hero World, I'm sure that you looked at our entire portfolio and liked it.
We launched Mavrick 440, which, as we said, the bookings will commence in this month and deliveries will start in April. That we are boosting further our premium portfolio, which is already looking very, very formidable. We also launched Xtreme 125 in the 125cc segment to strengthen our 125cc portfolio. And you will see deliveries starting on that as well.
In terms of EV, we have been creating all the right infrastructure. We've collaborated with Ather creating one of the widest charging infrastructure in the country. We've been expanding our presence to cities, to dealers apart from creating dedicated Vida Hubs as well. And you will see a lot of action on the EV portfolio very soon in the coming quarters. While we've been driving premium and our EV and of course, strengthening our 125cc portfolio as well, we've been focusing on the non-product revenue streams as well as part of that.
And you've seen the growth that we have seen in the parts, accessories and merchandise business over the last 3, 4 years. It's cost an annualized revenue of INR 5,500 crores and therefore, we decided to put an investment of INR 600 crores behind this, which will be spent over the next 2 years, which will take the capacity of the fan business, as we call it, to INR 10,000 crores plus. So that's the news on the business front. There is more, but I would like to leave more time for the questions from you all.
Just wrapping up on the economy front, it is heartening to see that even though it was vote on account, the government continuing to be there on the path of the long-term growth. And therefore, the CapEx provision of INR 11 lakh crores is fantastic in terms of the numbers. And on back of the 2, 3 years of INR 8 to INR 10 lakh crores of CapEx, it means that this will trigger the job creation, employment and income opportunities at the bottom of pyramid.
Overall, and that, of course, the government has also ensured the fiscal prudence. That, therefore, that means that inflation will continue to be in control. Therefore, we are very optimistic and confident about the economy in general and of course, the prospects of auto sector in particular.
Let me now hand over to the floor for questions.
[Operator Instructions] We'll take our first question from the line of Gunjan Prithyani from Bank of America.
My first question is on just trying to understand the demand better. I'm really keen to hear from you on the -- what is the confidence around the sustainability of demand for the 2-wheeler space going forward? And what are we seeing on the ground rural, urban pent-up demand? And the reason I ask this is because if I go through what's been coming as commentary from the other consumer companies or financials seem to be suggesting there's a lot of weakness in the lower end of the market, while 2-wheeler certainly seems to be in the bright spot.
So just trying to understand what is the divergence, what are you picking up on the ground? And how confident are we of this sustaining over the course of next 6, 9 months?
Thanks for the question. As far as the demand is concerned, as we have been saying, we do expect the industry to grow double digit on revenue in the coming year at the least. And you've seen also the similar commentary coming from other players in the 2-wheeler space. Fundamentally, as far as the -- and premium has been outstepping the growth because India is a story of many Indias. And gradually, you see upper premium, middle premium. You see even in 125cc. if you segment it into 2, which is the upper -- premium 125 and, let's say, a non-premium 125cc, and that's also growing.
So you see in every segment, you kind of see premiumization, and that's growing. So it's not just about the top end of India, which is growing. You can see aspiration of people growing. At the -- really the bottom of pyramid, as I just said earlier, the heavy CapEx spend that's been happening, the digital inclusion that's been happening, the hospitality industry that you can see clearly, which is lifted up, it's actually lifting the sentiment of the consumer at the bottom end. But that will get manifested as consumption in different categories at different points in time, and which is why you see this divergence.
But we clearly see the positive signals which are emanating from the rural sector as well. And we will see in the coming quarters, growth picking up from that segment.
And anything that you can share in terms of how the growth rates are varying between rural versus urban for your portfolio?
Not specifics, Gunjan, but if you look at it in the festive, for instance, we had a higher contribution coming from rural versus urban, if you compare to the preceding few months. And even if you look at the inquiries which we track, for instance, overall, the mix of the inquiry that you see, there were like in the last, let's say, quarter 2, quarter 3, quarter 4 of fiscal year '23, it would be around 40% inquiries coming from rural and 60% from urban. Now that seems to be going up to 50%, 55% inquiries coming from rural. Now therefore, as the inquiries are starting to pick up, that will manifest indeed consumption moving forward.
Okay. Got it. The other question, Niranjan, that I had was that this financing, which seems to have certainly gone up a lot on the 2-wheeler side. And that's something which is very specific to 2-wheelers within autos. It was much less penetrated a couple of years back. Is that something which is really -- is a pretty strong lever in terms of reviving the market. Any thoughts around that?
Absolutely, Gunjan. If you go back to our earnings call, I've been -- we have been calling this for many years now that financing is going to be the big driver. If you remember, even when it was 40% to 45%, 50% penetration. And that definitely is a big driver, not just now but moving forward. I would even say that next 3 years, the single biggest driver from industry point of view, will be the finance penetration down to the lowest rate. While from the economic point of view to the CapEx spend, but from the industry point of view, it is the finance penetration. And finance penetration in terms of the entire ease of financing, the convenience of financing and the cost of financing and the width of financing the entire way. And that we've been working with all the finance players. In fact, we have piloted our eFin platform very recently that will be scaled up moving forward in the fiscal year '25.
Now what that does is aggregating all the finances on 1 platform and makes the processing of loans much faster and very convenient for the customers. So it's just got piloted, it will be scaled up very soon, but clearly, finance is the big driver for the next 3 years. because that's where -- it's not the ticket price, which plays a big role. It is about the ease of financing and the cost of financing.
Okay. What is the financing penetration, if you can share and I'll join back the queue.
Sure. The financing penetration, as far as the overall is concerned, it's close to around 60% to 65% and FinCorp is close to around 30%.
We have a next question from the line of Chandramouli Muthiah from Goldman Sachs.
My first question is on the pricing environment. we seem to be heading into a slightly more benign commodity price environment. But I think Hero has been pretty proactive in taking opportunities to raise price, maybe a little more than peers in the industry over the past couple of quarters. So just trying to understand, have you sort of covered for most of the commodity inflation we faced over the past couple of years in terms of passing on price hikes? Or is there a little more to go? And also, just related to that, have we been able to take any price hikes so far in January and February.
I'll just correct you, we have not been taking prices more than overall what gets justified as a market industry because product and price positioning, we have ensured that we maintain and we keep evaluating this every quarter in terms of the product positioning in the market and we keep adjusting it for the future enrichment that we are doing. So like-for-like, if you see, it is very similar.
On the second question on the inflation power, yes, all the inflation that you saw and therefore -- and that time also, we said that we got to be sensible and therefore, we took partial hit and partial pass on and now that's all got covered. And yes, the commodity environment currently is benign.
Got it. That's helpful. My second question is on the electric motorcycle plan that we recently shared in Jaipur, at the Hero World event. It appears that we are going to start maybe with performance motorcycles, then premium and then slowly go on to mid over time. So just trying to understand the thinking behind that given that we've historically been pretty strong at the entry level. And then with electric motorcycles, we seem to be looking to start with performance in premium.
Yes. The thinking behind that is very simple, which is that if you look at the cost of putting EV in a commuter and lower segment. It will become hugely unaffordable because for a motorcycle, the distances that you need to cover and the power that you need means that you need twice the battery capacity on a like-for-like at least compared to the scooter. Already the scooter TCOs are still not at a level whether it is viable. And therefore, you see OEMs having cash burn or cash investment, you may call it.
So therefore, it makes sense to start at the performance motorcycle where the customers can afford that price. And gradually, as the technology evolves and changes and continue to learn and gear up. But clearly, the EV in the next few years is going to be about scooters until the technology that is changes. Let me ask Swadesh who is our Chief Business Officer for Emerging Mobility business unit to talk more about this 0 collaboration and our thinking behind starting from the performance EV motorcycles. So they short.
Yes. Thank you, Chandramouli for the questions. Niranjan clearly covered why it's going to be a little while before you see EVs coming in the commuter motorcycle segment. I think the industry is moving from high-performance scooters to now affordable scooters. That's the story we need to make sure that we are leading that. On the 0 collaboration part, we are aggressively working on getting the high-performance scooter. And also working on the higher end of any new technology and a new product allows you to then make sure when you come in the affordable, you are much more prepared from technology and cost point of view. So that's another reason to start from the top.
We have next question from the line Jinesh Gandhi from Ambit Capital.
Niranjan, you talked about rural markets, you are seeing some positive signals from the rural market. So can you elaborate further on that? What are those signals? And also more importantly, post festive, how has been the retail trends and inquiry trends in the rural market on the entry-level side.
Jinesh, you're a little -- your voice is a little muffled. Maybe you want to try again?
Yes. So my question was on the rural markets, Niranjan, you talked about positive signals from the rural market. So if you can elaborate on that. And secondly, with respect to the retail trends post festive in the rural markets, are they holding up and growing on low base of last year. Has that been visible on the ground?
All right. Jinesh, firstly, congratulations on your move to Ambit Capital. And I hope you've settled well at Ambit Capital, will get the benefit of your years of experience that you have had at Motilal. Jinesh, on the rural side, as we said, see, I think we make too much out of the rural demand signal. So if you look at the structure of the industry, if you look at -- even within rural, you have more aspirational, more urbanized class. So it's not 2 wheelers. It's stopping to be about only rural and rural one. So I think that's the part of it. And as I said, that we take our queue more from the inquiries that are going up from around 40%, 45% of the inquiries coming from rural. Now the percentage of inquiries have moved to 50%, 55%.
Now clearly, therefore, people are willing to buy coming forward, that coupled with as the income level expands with all these CapEx going in and the finance penetration, this is just a stock. And therefore -- because the appetite or the under penetration is very, very clearly there in terms of demand to be translated. And on the festive, post-festive, yes, the season in December typically is soft. It has started picking up already post January 14, and you will see it going up. Actually, we are not worried about the month-to-month or a few days here, few days there. But the fundamentals of demand actually continues to be there. In fact, in the festive season, the rural contribution to retail actually increased by 300 bps as we have said earlier. And therefore, it will continue moving forward.
Got it. And second question pertains to the commodity cost influence in 3Q, we had seen a further increase in gross margin. So are we seeing this trend to continue? Or now stability in commodity prices is there and a large part of the benefit is fully reflected in numbers?
I think broadly, I would say that our commodity is stabilized. And the margin improvement is not just reflective of the commodity cost. If you see our -- we've done a lot of premiumization across our portfolio. So it has a mixed element to it. And it's got lead savings benefit into it. And of course, it's good part the commodity benefits as well. In fact, our ICE margins are now close to 16% and this quarter -- festive quarter, we did come in a lot of money behind EV marketing to create our line awareness. I'll ask Swadesh to talk about the Vida brand awareness very soon, and we invest around 200 basis points in our EV business, taking margins overall to 14%.
So I think we're in a good space where we are able to invest more behind our growth priorities. Swadesh, would you like to talk about how we have used this to increase the brand awareness scores of Vida in this quarter.
Yes. Thank you, Niranjan. Yes. So Vida coming from the house of Hero, obviously, there's already a strong backing. But for a new brand, we had to make sure that people are aware that Vida EVs are coming from the house of Hero. And we have partnered with the key cricket properties, we partnered with key TV properties. We have been very aggressively going on social media and local print ads. And we have really seen the jump up in the last 3, 4 months on what our awareness scores are. It is still early times. India is a large country, and many India as Niranjan always talks about. So we'll continue to build on it, but we are on a good trajectory.
And continuing on the EV side, so how have we seen our expansion in our touch points on the sales side? And how do we plan to expand it further?
Thanks for that question. Yes, this year has been incredibly good for us in terms of expansion. Once we start putting our expansion -- action in place, we have been growing almost a city a day. Now we are 100-plus cities, 150-plus dealers across 3, 4 formats. We started with experience centers, then we are present in all -- in Hero 2.0 stores across these 100 cities. We have close to 18 hubs already -- Vida Hubs, which are exclusive -- small format, exclusive dealership and we plan to really take it up to 100 hubs next year, and we will be present in maximum Hero 2.0 as that is also scaling very fast for the next year.
And at the same time, we are also present in Premia. So you'll see these multi-store formats will be present across and with our increasing portfolio and accessibility at every point, we definitely will see a huge scale up in FY '25.
We have a next question from the line of Kapil Singh from Nomura.
My first question is on -- you talked about the fact that we will now be using the margin shape to fuel our growth in the future. So if you could just elaborate how you are thinking about this, what is going to be the strategy? Should we expect 100 to 200 basis points kind of investments to fuel growth?
And particularly for EVs, what we noticed is that there has been some discounting in the industry recently. So just an industry-specific comment, is it that you are noticing that demand for EVs have softened? Or is it that the profitability with these discounting is coming under pressure. So just some color on that.
Yes. So on the EV market side, as we have mentioned earlier, EV is in a huge transition right now. I think it's moving from the early adopters to early majority. And the early majority is definitely going to look for upfront price parity between EV and ICE products. They don't want to compromise on their charging requirements. They don't want to compromise on their service requirements. So any serious player is going to make sure that they are playing at the right price points, at affordability of these scooters and making sure their charging infrastructure and service network is to the best level.
Now your observation about these price wars are discounting, I think that's just a reflection of when some of the players are not ready with the right -- the products are there. They might be trying to play a price discounting gains. But as we have always said, that we are here for a long run, EV is a marathon. We don't want to get caught up in a short-term price war. We want to make sure we have the right products at the right price points and closer to the customers.
And we know that with that strategy in place and our heavy cost reduction road map internally which we have, we will ensure that we have the rest the right products in the hands of the customer. So we are not too worried about it, but your observation is right. The industry is going through a price war.
And Swadesh, you talk about are we launching in quarter 1?
Yes, yes, yes. Thanks for adding that, Niranjan. So as we have said that we are coming at -- we're going to be playing in 3 price points within the quarter 1 of FY '25, which includes our affordable and the mid segment with a very competitive offering in the market. So with that in place, we definitely see that we'll have the right positioning to scale up fast in FY '25.
So Kapil, in short, you will see our price action combined with the product action and not as a stand-alone and expansion of the portfolio. Coming back to your first question, which you talked about the reinvestment. See, it's a dynamic margin management. So you deploy client growth priorities, and we've been saying this, the tramline for ICE margin is 14% to 16%. And I've consistently been saying that we've been on that part, we've ensured that we put the savings in, premiumization in, the premium products in.
So you will see that the investment, the deployment of CapEx, of OpEx and more going towards premium, going towards EV, going towards our digital priorities, which I've been talking about at various stages. So it is the resource allocation which is key to growth. And good thing is that we have cash earned, which we can fund with this. So we don't need to be in a cash burn scenario.
We'll take our next question from the line of Pramod Amthe.
So the -- considering that the government push for alternative fuels and also wanted to [indiscernible] talking about...
Pramod, do you want to get closer to the phone or pick up your handset, please. Pramod, we will come back to you. Let's go on please.
We'll take our next question from the line of Mumuksh Mandlesha from Anand Rathi.
Congratulations on the continuing seeing gross margin improvement despite the festive skills during the quarter. Sir, we partly talked about earlier on the demand side, but can you share more thoughts on how do you see the growth in the subsegments of the motorcycle and scooters for 1 -- next 1 year perspective? I mean in the context of the premium and scooters have largely recovered in comparison to FY '19. So how do you see the next 1 year the growth between the subsegments?
So let me ask Ashutosh, who's our National Sales Head to throw some more light on growth moving forward without of course Ashutosh giving that exact number, right?
I think from the subsegment level, we would see the 125cc motorcycles continue to drive the overall motorcycle growth portfolio. That's a segment that's been doing very well this year. And we expect that to continue for next year as well. Also from a premium perspective, we've been seeing that the segment greater than 200cc is the 1 that's driving the growth. We expect a good double-digit growth there to happen as well. Of course, it's been fueled by a lot of new launches. We've been a part of it, too, with our launches in X440, Karizma and the upcoming Mavrick. So this is where we feel that there will be a lot of traction.
Of course, on the scooters 125cc, that's another segment that has done well this year, and we expect the growth momentum to continue and overall lead the industry to the growth number that largely everyone has been protecting for.
Sir, lastly, are you making large investments in the part center. So how do you see the pace of the growth in the part and accessory revenue ahead?
So you're already seeing that our growth in the parts and accessories, merchandise business. And that was led by the micro distribution strategy, which is growing more retail on the similar lines of the FMCG that we talked about. So overall, if you see from a time of around -- we used to have a business of around close to INR 3,000 crores revenue, and that's now clocking INR 5,500 crores as an annualized revenue. This has happened over the last 3 to 4 years, the growth that has happened. And therefore, we are putting this investment. This investment will take up our capacity to INR 10,000 crores annual revenue equivalent.
And the capacity this year putting up in our Tirupati plant, which is already there. So land is there, so the capacity will be coming up there. Within the parts, accessories and merchandise, so we continue to see that double-digit growth for the next few years. In fact, within this segment, there is a focus that we are also going to provide disproportionately on the accessories and merchandise part because we do see a lot of potential -- a lot of potential on the accessories as customers -- as we say, customers are becoming more aspirational. And when they buy a product at that time itself, they want to fit some of the premium accessories.
So every product starts looking more premium, and that's the aspirational India that we are talking about. And then the merchandise, which now is the right time for us given that we now have a robust premium portfolio. So on the back of that, whether it's a Harley-Davidson X440 or Mavrick 440 or Karizma, we're going to launch our range of merchandise moving forward and therefore creating this as a business itself. And this will be dropping off on each other.
So on the back of the premium portfolio, we were building our merchandise business and the merchandise business will then rub off further on the premium imagery of our portfolio. And therefore, in terms of our -- it becomes more like an adjacent business, and there are premier dealerships as well, which are there. And therefore, all of this come together to then power our merchandise business and providing the premium -- more premium imagery to our entire portfolio. So that's the entire plan for the past accessories and merchandise business.
Just only what could be revenue per part saving this quarter?
Revenue for the part in the quarter that just finished, INR 1,426 crores in the quarter that finished, and the corresponding period last year was INR 1,259 crores, and just the preceding quarter was INR 1,354 crores.
We have a next question from the line of Pramod Kumar from UBS.
Niranjan, I just wanted to understand the launches that we've done over the last 2, 3 years. If you can just help us understand what is the kind of brand introductions, what we've done. The reason I ask this is despite multiple launches in segments, the market share somewhat is not kind of adding up. I understand the efforts all put in, in the premium side and the scooter side, but individual category market share and even the overall VAHAN retail market share doesn't reflect that efforts, what you're trying to put in and all that. So I'm just trying to understand what is -- how long will you -- do you expect these kind of things to pay out?
And to begin with probably if you can just help us understand a number of brands, what the company has put in over the last 2, 2.5 years because I understand some of the launches take time to play out and the investment needs to be done underground. So if you can just help us understand the brand actions taken so far in the last 2, 2.5 years? And how -- what is the kind of an action one can expect over the next 1 year, sir?
A lot of actions, Pramod, on this front. And you know very well that when you launch a new model, a new brand, you have to invest behind those to build a market share. They don't come overnight, and which is what we've been doing. And if you look at the launches that we've done extreme in the premium segment earlier, now that is going to get bolstered by the stores. Because we didn't have the -- at that point in time, the upgraded stores. We've now upgraded 300 stores in 300 days. By March end, we'll have 400 and next year, we'll cross 500 2.0 stores along with 100 Premia stores. All of this, Pramod, then provide the necessary arsenal for the premium portfolio to grow.
And the next thing is, which I've been saying always is that when you create a portfolio, when you create a win in premium, you need a full portfolio because we always had the commuter portfolio which is where now with Karizma coming in, with X440 coming, with Mavrick 440 coming in, the portfolio is becoming very robust. And this will have a rub-off on our previous launches as well, and therefore, you will see the market shares moving forward.
We are a bit optimistic. We are a bit more positive. And you can see the early successes in the recent period, whether it's the bookings of the X440, bookings of Karizma, and then we're going to, in fact, the Harley bookings have crossed 30,000 and our order book is almost now 3 to 4 months. The capacity, we are ramping up to 10,000 of the 440 and the Karizma segment that I talked about earlier by March, and the more work is in the play.
So I think you've got to have confidence in our strategy, I think most people have that. We do have -- we are very confident of playing it out. Each of these brands are new brands, power brands being built. And our profitability, our fund position allows us to deploy and accelerate that moving forward.
Excellent, Niranjan. And if you just kind of help us understand at the current level, how much of the volumes for you or the revenue split is coming from premium scooters and exports, assuming that exports will revive and is a high-growth category. So this high-growth category and focus areas for you how much is the revenue contribution currently, say, for this quarter?
That's irrelevant, Pramod, right now. As I have said that we will build this portfolio moving forward. So therefore, the contribution to talk about at this point of revenue is completely irrelevant. I think businesses are built on the long-term strategy and not on the short term looking at that, yes?
Yes. Then in that case, the ambition, what do you have the 3-year, 5-year view as to -- where you -- as a CEO, where would you like to take this part of the business because that will give you the due share of the industry?
Pramod, that's the right question that where we would want to take it to 3 to 5 years' time. Clearly we want to win in premium. And you can see that with the players that we're having in the next 5 years, we would like to have a meaningful market share of the premium segment.
Fair enough. And revenue, did I hear the 10% growth kind of a forecast for next year at the start of the Q&A? Or is there revenue growth you're referring to for FY '25?
Yes, Pramod. So that is the industry growth that we have said is that we expect double-digit revenue growth for the industry moving forward for fiscal year '25. And obviously, on the back of all our launches that we have done, and more launches to follow and investment behind those, we would expect, therefore, our growth to be higher, and that means the market share gains.
We have a next question from the line of Pramod Amthe from Incred Equities.
Considering the government of India's push for alternative fuel and 1 of the competitors talked about CNG variant. And you also added the fact that EV may take a longer time to enter this. So what are being your R&D efforts here? And what's the outlook you have in that space, especially for motorcycle, CNG or [indiscernible]?
Yes. So our R&D center has been working -- first of all, we've been continuously investing behind research and development, in fact, our investments in our R&D is almost twice that of our nearest competitor, if you look at the last 5 years. Because we do believe in investing behind technology, investing behind brands and that's what exactly we've been doing. So the -- our R&D is working on the flex fuel and as well as not just that, but also from the point of view of even within EV on the technologies -- on the battery technologies. So there's a lot of work that's happening on the technology side.
In fact, if you look at the ICE side with the BS VI, which is also a big change, the SOx and NOx emissions have come down by almost 90%. And then, of course, we are improving our mileage, which also means that less fuel consumption and that goes absolutely aligned to the government focus on less dependent on the fuel part of it. And flex fuels are also on the work. Swadesh, would you like to just talk a bit about in terms of the -- in the technology side, what we are doing on the battery technology and the R&D side, just a flavor of that.
Thanks for the question, Pramod. As Niranjan said, we have been pumping a lot of money in R&D. And across the flex fuels and the battery side, we're looking at various chemistries, various form factors to make sure that whatever the need of that segment of mobility is, whether it's battery driven or flex fuel driven, we are ahead of the game. And we are not going to slow down on either of the two, because both these sides are very, very important. And with our expertise at CIT in Jaipur and also our tech center in Germany, we are looking and in fact, working very closely with some of the external partners on keeping a tab and experimenting around new battery technologies as well.
So for us, both are important, and we'll continue to make sure we are leading the way.
In fact, if you had come to Hero World, you would have been able to see the entire CIT and what we are doing on flex fuel. I think our associates would have seen what you are doing on the flex fuel market.
Sir, extending the same, any -- when you see the commercialization for these because that's where I put the question competition is talking about it. Does it still make a commercial sense for you guys to adapt it or when you expect it not next year might be 2 years down the line? Any thoughts on that?
It will come in a phased manner because you would see overall different kinds of fuel, different kinds of power trends, operating in the next 5 to 7 years. So it's not about transitioning portfolio from A to B, but it's about providing this alternative and the options and obviously, finally, a customer is the king. So a customer will make a choice in terms of what type of vehicle and what kind of fuel makes commercial sense from a customer point of view. But we are ready.
We have a next question from the line of Raghunandhan N. L. from Nuvama Research.
Congratulations on strong numbers. Sir, firstly, on the upgraded 2.0 outlets, how has been the experience so far, the response from customers? How is it supporting bookings of premium vehicles and Vida. Also, if you can share some thoughts on the initial response for Xtreme 125, any bookings numbers you can share?
Absolutely. Raghu and thanks for complementing on our strong results. Let me ask Ashutosh to throw some light on the Hero 2.0 and the Xtreme 125 early indication.
Yes. Thanks, Raghu. One, the number of Hero 2 points stores, the base at which we are putting it in place is phenomenal. I guess is the fastest ramp-up in the industry. It's also delivering a very unique customer experience if you compare typical NPS scores, what industry has versus what, let's say, EV stores are developing, these are far higher. And we know that the customer service is top notch. Customers are appreciating that quite a lot, leading to higher conversions as compared to our normal outlets and also as compared to the industry.
This, of course, is just one part. I mean we are also setting up Premia stores, which are even higher and better NPS scores. We are getting good traction around -- of course, in these Premia stores, we have all the new 160cc and above models that we are selling from here, and we are getting good traction there in terms of overall bookings that we are servicing for the models that we had launched in the previous quarter.
Around Xtreme 125, the early indications, Ashutosh.
Yes. On the Xtreme 125, since the launch, we have been getting a lot of inquiries. In fact, the booking numbers are a little earlier to share, but just to tell you the overall search very volumes are much higher than the Vida brands in the 125cc scooty segment. And we are confident that as soon as it gets in the market, it will get that response that we are seeing in the initial inquiry traction.
Wishing all the best on Xtreme 125, the product ride was amazing at Hero World. My second question, sir, was on other expenses. 200 bps of EV marketing, brand building expenses, and there was also Cricket World Cup. Going ahead, given that the World Cup is behind, so the investments or marketing efforts, should that kind of reduce on a quarter-on-quarter? Trying to understand how much would have been the additional expense in Q3 and by how much it would kind of reduce in Q4? And also trying to understand the triggers for margins further scaling up given that the company always had the target of 14% to 16% margin brand.
Right. So in terms of -- yes, Q3 was the festive season. So clearly, the A&P spend had elevated and then they come down in Q4. I think for an indication why I won't give out an answer. But what you can look at is the 9 months of the other expenses for a trend line because that absorbs the highs and the lows of the quarter.
In terms of the margins, I would just talk about the shape of the margin. So the 14% to 16% tramline, the ICE margins are at 16%, allowing us to invest even more behind the growth priority. Our shape of the portfolio in the next 5 years is changing. Clearly, if you project from today to 5 years down the line, you would see more of premium there in the portfolio, whether that's scooters premium, whether it's EV premium, whether it is or the normal ICE premium. So clearly, structurally, the margin shape will be moving upwards. But of course, it will follow with the scale that we achieved in these segments moving forward.
Just the last question. On the EV production ramp-up, given that the product is being made available in more cities and Q1 we should see more launches. Should we expect that 10,000 per month mark to be achieved by then?
Well, let me ask Swadesh to answer it. Swadesh?
Yes. We have been ramping up our capacity quite aggressively, not just in our Tirupati plant, but also across the supply chain, and we are well placed to how we need to sort of ramp up from FY '24 to FY '25 on to the sales numbers. And yes, across all the 3 segments, and across the total capacity required for battery, we will be very well placed to scale up fast in FY '25.
We have a next question from the line of Prateek from Nippon AMC.
Just 1 question. You called out 2% of your sales being invested in the EV division, which if I annualize is close to INR 800 crores. Could you just talk a bit about its into how much of it is going into product development? How much of it is discounts, marketing, network expansion, supply chain management, et cetera, please.
Sorry, I didn't get the question. What is INR 800 crores?
No. So you said 200 basis points is what was the drag, right, of the EV portfolio?
That is for the quarter.
Yes. If I annualize that, that's close to INR 800 crores. Maybe it could be close to INR 600 crores.
Yes. Overall, for the year, if you look at it, it's close to between 125 to 150 basis points, but the quarter is elevated because of the A&P spend of the festive. So if you look at it, while we'll not give out a split of this, but it is going behind, obviously, there's a product because with the unit cost, unit margins in the industry are low being negative. And then thereafter, there is obviously marketing spend being done to build Vida as an aspirational brand.
Of course, on the CapEx side, also, we are investing behind EV on the R&D side in the technology. There's a lot of action happening on achieving cost leadership on reducing costs of how we make, but that's what you'll determine. Swadesh, would you to try to talk about the efforts that we are doing the reduction in the cost of the products.
Yes. Okay. Yes. I mean quickly coming into the cost base, but obviously, 1 other area where we're putting investment is building the very strong charging infrastructure because we want to make sure that for the long run, we have all the building blocks for faster adoption. And with us being the leader in those ecosystem pillars being there, more and more customers will adopt Vida as their choice.
On the cost side, we are definitely looking at everything from design, localization, simplification of the product and obviously, economies of scale. All of these have been -- are being aggressively worked between the product team, the R&D team and the supply chain and production team. And we are looking at a significant reduction in the coming years. And that will place us to play even more aggressive in some of the segments.
Got it. The second question was, Niranjan, look the ball is well set, right. Next year will be very strong for you in terms of premium. You yourself have called out premium is outperforming the industry growth mid-subsegments or overall. In terms of execution, what are you may be doing so that you don't get -- don't lose this opportunity? I mean I understand in terms of upgrading network. But apart from that, just from an execution perspective, because within the industry if I see, you are the only player which has had such a strong model lineup and filling of white spaces, how should I think about, let's say, execution of this such that you don't lose a big opportunity?
I think it's a good question. And let me just elaborate on this. So you're absolutely right. I think in the industry, now with our launches, which are there, we have the strongest model lineup in the 2-wheeler segment. What we are doing, you can see, it's not just been about product. So there are product launches which have happened in the model. First is we are ensuring that each of our models have some first-in-class and some best-in-class features. So I think that's the 1 part of it. So we're not just launching products which I just need to are exactly the same. One part.
The second part is the marketing investments behind this where we are going a combination of the digital and traditional marketing. And you can see actually, when you go to our digital marketing, our social media, what the efforts that we are doing is a very dedicated effort behind that to make the customer journey very different. That's the second part of the execution.
The third part of the execution is the stores. And that's why we've been harping on that a lot. But if you were to launch these models with the same-store profile that we had, then we would not meet with the success, and that's why you've seen parallel. So these are not like different activities. These are execution activities because execution means finally, we have to realize an extract like you said, the potential of these models. And that's where the stores come into play, Ashutosh explained.
Within the stores, what we are doing is dedicated sales executives because that's part of execution. So for all these premium model lineup, we talked about premium, we talked about EV, both these will have a completely dedicated sales executives who are trained for that, and therefore, that's another execution part of it, which is there.
In the -- and then on the marketing side, apart from what we talked about, the traditional marketing, digital marketing, what we are doing and you would have seen in the right, the entire it drag it all of these, the test drive that is getting ramped up big time, the test drives and there are, of course, the rallies and the rides that we have.
So from an entire perspective, if you look at execution, all parts of what you require to execute on these models, they are in place. So that's why we are confident. And essentially, if you look at the product, the positioning, the placement, the pricing, the marketing, all of that -- and it's part of the entire game plan so that it's not just that by launching models that we will get success. And which is what we call it, it's a complete all round strategy and execution in place for that.
We have a next question from the line of Mihir Zaveri from ASK.
Just 1 quick question. Sorry if I missed it. What is the inventory situation right now, if you can share. And also, overall, are we seeing some moderation in retail demand or the retail trend continues to remain buoyant. These are just my 2 questions.
Yes. As far as the inventory is concerned, that our range of inventory is 4 to 6 weeks, and it continues to be in that range. And the retail demand I talked about is picking up. I mean, in a sense, that went down. The festive saw the demand picking up, post-festive is usually a bit sluggish, now post middle of January it's picking up. So the underlying tone of the demand is strong, and therefore, we will see that momentum building as we move forward.
In fact, just on the inventory, overall, for the year, if you look at it, we have reduced our inventory. So from a beginning inventory to our ending inventory or reducing inventory in terms of the absolute level to -- and that's something -- and that's why our retail market shares are higher than our wholesale market shares.
We have a next question from the line of Abhishek from Dolat Capital.
Sir, what is your plan for gaining market share in ICE scooter segment and export?
So I'll talk about the global business, and then I'll ask Ashutosh to talk about demand for increasing market sharing scooters, a lot of excitement with the new products that are coming.
On the global business part of it, what we are doing is we will be disproportionately investing behind the top 10 markets, which include the markets like Mexico, markets like Nigeria, like Colombia, like Bangladesh. So while we have the footprint across almost 50 markets, the focus will be on accelerating growth in these markets. There's been a change of distributors that we announced already for Nigeria and Nepal and there are launches which are planned in the global business as well.
Ashutosh can you talk about the scooters, the excitement that's going to come?
Abhishek, thank you for that question. In fact, if you look at this year's performance, we are the only OEM to have gained in the 100 ccs of the market space. So we've done well there. And with that sorted out, I think the job for us is the 125cc. And there we have a lot of exciting products lined up for next year. We are augmenting our portfolio, which will improve the market share there. Already in this category, we've launched the Destiny Prime this year which -- the later part of the year, and that has met with some phenomenal response. It's a great value proposition story, and we expect to build on to all these next year.
In fact, just to add, I think we should be able to launch the 125 and 160cc in the first half of the fiscal year '25.
Okay. So what is your growth target for the scooter and export segment for the next 2 years?
As you know, I would never give out a number. But the efforts which are there are very concentrated and therefore, you see like scooters, who -- which has launched 110 have received, big traction -- and then the 125, 160cc again, our differentiated products with first-in-class and best-in-class features, the larger wheels. So you will see -- so you would have seen the [indiscernible] Hero World these products. And as these products come in, the scooter growth will rebound for us as well.
And sir, in ICE, margin is around 16%, as you mentioned. It means that we have lost around 200 bps because of the EV segment. So how these losses will reduce in the coming quarter?
So we've not lost. I will just correct it. We've invested 200 bps behind EV. Because of festive, the investments are obviously elevated. And these margins allow us to invest. So we're going to build premium. We're going to build EV. And while building that, we have delivered a profit growth of 50%.
We have a next question from the line of Kapil Singh from Nomura.
Just a follow-up, you had talked about launching products in affordable and mid segments. Just curious to understand how do you define these segments in terms of price points?
Right, Kapil. Let me ask Swadesh to talk about.
Thank you, Kapil for the question. So right now, if you see the market is sort of divided between products being upwards of INR 1.4 lakhs, INR 1.5 lakhs. There are a few products between INR 1.25 lakhs to INR 1.5 lakhs and then a fewer between INR 1 lakhs to INR 1.25 lakhs, right? And then some products are going to come under INR 1 lakhs as well.
So we believe that affordable is going to be closer to INR 1 lakhs, like INR 1 lakhs or below, right? And mid is going to be another INR 20,000, INR 25,000 on top of it. I think the idea is that people need to be able to buy these products very close to an equivalent ICE product, right? And we need to make sure that the right value proposition on those pricing are available. But overall, INR 1 lakhs or slightly below INR 1 lakhs and then another INR 25,000, INR 30,000 on top.
So actually, the operating prices for some of the premiums scooters have come down more in the midrange, right? Would that be a right observation?
Kapil, see, there's a short term. So if we are -- what we are talking about is in a stable scenario, there will be months here and there, there are some offers that come down, but like what Swadesh has said, if you have to very broadly look at the 3 price points, not just from our perspective, but from a customer perspective, it's INR 1 lakhs, INR 1.25 lakhs and INR 1.5 lakhs, give or take a few thousand here and there that doesn't matter. But broadly, there are 3 differentiated price points. And importantly, what's going to happen is it's not just a price point, eventually, it's a cost leadership that will determine the winners. Because there is a limit to what a player can bleed or get a hit on the unit cost. And that's where we are focusing apart from portfolio.
And also the whole package, ultimately, EV is still not just a product game, right? So with our charging infrastructure, which our expanded service network, which is already on top of how EV needs to be serviced, I think you have to look at the whole package.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.
Yes. So thank you for attending the call. And as we said, the quarter has been good with 20% top line growth and 50% profit growth. Our models are there. We have the strongest model lineup in the 2-wheeler industry. We have all the wherewithal and the ammunition and the fuel for powering growth as we move forward. Thank you.
On behalf of Prabhudas Lilladher Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.