Linkfest:Oct 24,2012

Some stuff I am reading today morning:

CBI raids IRB’s chief’s aide in murder probe (IndianExpress)

Saudi Arabia uses India to balance Pakistan (WSJ)

Hero Moto Corp shifts to reverse gear (Mint)

Rain Commodities’ rise from a troubled legacy (BS)

Heritage Food is flying high (Gaurav)

Return of the golden age (ET)

Apple unwraps mini iPad (Reuters)

Where did all the finance bloggers go? (TRB)

The geopolitics of computer trading (FTAlphaville)

What do we know when insiders don’t trade (Climateer)

Hero MotoCorp Q2 profits fall 27%

Yesterday, I had blogged that we have seen “peak” Hero Moto Corp.

Right on cue, today Hero Moto Corp announced its Q2 results.The results are quite disastorous with net sales slumping by 11% and net profit falling by 27%.

In the press release, this is what  Mr. Pawan Munjal Managing Director & Chief Exeoutive Officer, Hero MotoCorp Ltd. had to say :

” The two-wheeler market in the country has been adversely impacted due to the overall market slowdown and prevailing sentiments since the beginning of this quarter, Sensing the slowdown in the market, we led the way in adjusting our production plans in August and
September, and this has been reflected in our quarterly sales figures. The onset of the festive season has been encouraging, with the retail sales of over two lakhs in the Navratras.
We, at Hero MotoCorp will continue to bring new launches even as we expand our distribution reach to over 5400 outlets during this fiscal. Our global business plan will also take shape this fiscal, with the launch of Hero products in new international markets such as Nigeria, Kenya and Guatemala, having already launched in existing markets such as SriLanka and Nepal in September”

 

Er, Mr.Munjal what about the bull’s eye painted on your back by Honda and Bajaj?

Linkfest:Oct 23, 2012

Some stuff I am reading today morning:

Guarding Kerala’s great temple treasures (WSJ)

A big rap on the knuckles for SEBI (BS)

RBI Watch:Gauging the potential of emerging markets (RBI)

Three insurance queries to ask before buying a car (Mint)

Warren Buffett does not practice what he preaches (FirstPost)

India leaves foreign investors unamused (FT)

Bye Bye PCs (Barrons)

Is “uncertainty” really that big a deal? (FTAlphaville)

How to crash an economy and escape the scene (ClimateerInvesting)

New Asian Frontier Markets (DeutscheBankResearch)

“Peak” Hero Moto Corp

There was this great article in Forbes about whether Google has hit its peak revenues.The author writes

I’m normally extremely sceptical of arguments about “Peak” stuff. Peak copper, peak oil, peak water, I can usually be relied upon to pooh pooh or rubbish those stories about natural resources running out. However, with corporates and with technological offerings I’m entirely ready to accept such peak arguments. For any company is only ever exploiting a technological niche provided by the current technological environment. And those disappear just as quickly as they arise. So I’m convinced that we will indeed reach peak Google.

 

Now that leads me to think if there are any Indian companies out there who have hit peak revenues.Lots of companies in the past have been done in by technological changes – Tata Yellow Pages, Moser Baer etc

The interesting question is which company right now is having peak or close to peak revenues and will get done in by technological/regulatory changes.

I feel Hero Moto Corp fits the bill. The separation from Honda has ruptured this companies’ DNA. It is struggling to sell its dated models.In Sept 2012, it sold 4.04 L units of two wheelers as compared to 5.49 last year (a fall of 27%).Bajaj in contrast witnessed a decline of only 12%.

Hero is cash rich and is investing aggressively in R&D to fill the technology gaps in its product line.But the auto business is such that you need a dynamic promoter at the helm who is passionate about the product.Think Ratan Tata,Rajiv Bajaj, Anand Mahindra etc.All of them are involved in the design of every new product.

Fierce competition, technological irrelevance and mediocre management all point to “peak” Hero Moto Corp