Spike in crude oil prices, recovery local currencies drive sales in markets abroad…
The two wheeler major, Hero MotoCorp is expanding its focus in the international operations as with the spike in the crude oil prices and recovery in the value of the local currencies many overseas markets are seeing an increasing demand.
The global business had registered a volume decline of 14 per cent during FY17. In FY18, the company sold a total of 204,475 two-wheelers in overseas markets, growing 12 per cent over the previous year. The sales in Bangladesh grew 194 percent during the last fiscal year whereas the sales in Argentina grew 252 percent and other Central American countries also saw a three digit growth rate.
Why this is important
Hero MotoCorp had made significant investment in the past to set up manufacturing units in international market such as Colombia and Bangladesh. However, a crash in the global crude oil prices to about $30 a barrel in few years impacted all oil dependant countries.
With the crude oil now hitting a four year high of $80 a barrel, the company expects the demand to pick up significantly and is also planning to launch six products for the global markets during the current year.
Stocks to be impacted
Though exports form less than three percent of the company’s annual volume, Hero remains bullish on prospects and aims to sell to 50 countries by 2020 from less than 40 countries currently.
Hero MotoCorp (CMP: Rs. 3635, MCap: Rs. 72,590 crs, FY2020 PE: 14.5x)