UPDATE 1-Hero MotoCorp accelerates drive overseas after first profit gain in five quarters

Wed Oct 23, 2013 9:44am EDT

* Q2 profit 4.81 bln rupees versus 4.63 bln rupees analyst estimate

* Sales volume rises 6 pct, inflated by output cut in the year prior

* Company to enter eight more markets by March (Adds details on exports and competition, plus executive comments)

By Aradhana Aravindan

MUMBAI, Oct 23 (Reuters) - India's Hero MotoCorp Ltd , which posted its first profit gain in five quarters, aims to sell motorcycles in eight more overseas markets by March to ramp up its export earnings in response to an increasingly combative home market.

Hero, like rival Bajaj Auto Ltd, has been pushing sales abroad to make up for shrinking market share in India. It plans for exports to account for 10 percent of sales in the next four to five years.

"Now we are in 10 overseas markets, and we are getting into a rapid launch phase in the second half and we plan to add eight more markets in the next six months," Anil Dua, senior vice president of sales and marketing, told Reuters. "We expect (exports) to be flat in the second half. In the next year we expect them to really start growing."

India's largest maker of two-wheeled vehicles reported on Wednesday net profit of 4.81 billion rupees ($78 million) for the fiscal second quarter ended Sept. 30. That compared with 4.41 billion rupees a year earlier, and the 4.63 billion rupees mean estimate of 14 analysts according to Thomson Reuters I/B/E/S.

Sales rose 11 percent to 57 billion rupees, matching analyst estimates. In volume terms, sales rose 6 percent from a year earlier, when the company reduced production to adjust its inventory.

The company attributed the gain primarily to a low comparison base and increased shipments ahead of the September-December festive season when many Indians consider it auspicious to buy big-ticket items such as vehicles.

"The sentiments are positive and there is a momentum for us in the market," CEO Pawan Munjal said in a statement, adding that rising input and labour costs could pressure margins in the auto industry.

OVERSEAS PRESENCE

Hero's overseas presence pales in comparison to Bajaj, India's biggest motorcycle exporter.

So far in the fiscal year started April, Hero's overseas two-wheeler sales were about one-tenth those of Bajaj, or 2 percent of total sales compared with 37 percent for Bajaj, data from the Society of Indian Automobile Manufacturers (SIAM) shows.

Hero started selling vehicles in Kenya, Burkina Faso and Ivory Coast in July. It has since launched operations in Peru.

The two-wheeler market comprises motorcycles and scooters which are often used in India as family vehicles. Hero's market share was 41.5 percent at September-end from 42.7 percent a year earlier, while Honda Motor Co Ltd's local unit had a 22.7 percent share, up from 19.0 percent, according to SIAM. Bajaj, which does not make scooters, accounts for 15.4 percent.

Last week, Bajaj reported profit which beat analyst estimates as a weaker rupee gave its export earnings a boost. ($1 = 61.6600 Indian rupees) (Reporting by Aradhana Aravindan in MUMBAI; Editing by Christopher Cushing)