India's Hero Honda Q1 net up 44 pct, beats forecast

MUMBAI, July 29 (Reuters) - India's top motorbike maker, Hero Honda Motors Ltd (HROH.BO), reported a better-than-expected 44 percent rise in quarterly net profit as higher sales of premium bikes offset firm interest rates and pricey raw materials.

High prices of steel, rubber, oil and other raw materials have hit margins of vehicle makers, while record-high inflation has crimped consumer spending and rising interest rates have depressed demand, particularly for entry-level 100 cc motorbikes.

Hero Honda (HROH.BO), in which India's Hero Group and Japan's Honda Motor Co (7267.T) each hold 26 percent, has more than half the Indian market for bikes, the world's biggest after China.

New Delhi-based Hero Honda said on Tuesday that net profit rose to 2.73 billion rupees ($64 million) in the fiscal first quarter to end-June from 1.90 billion a year earlier.

Net sales rose to 28.44 billion rupees from 24.48 billion.

That beat a Reuters poll forecast of a net profit of 2.51 billion rupees on net sales of 27.36 billion.

Its operating margin, a key measure of profitability, expanded to 11.99 percent from 10.8 percent a year earlier.

"We have continued to invest in expanding into new markets in semi-urban, rural and up-country areas, resulting in strong topline growth," Managing Director Pawan Munjal said.

"Simultaneously, we have continued to focus on all-round efficiency improvement and cost rationalisation," he said.

Hero Honda sold 894,244 units in the June quarter, an 11 percent increase from the same period a year earlier.

In April, Hero Honda opened a plant in northern India with a capacity of 1.5 million units, and is pushing a more premium line-up as it faces a difficult market and a tough fight from No. 2 Bajaj Auto (BAJA.BO) as well as TVS Motor Co (TVSM.BO).

Bajaj earlier this month posted a better-than-expected quarterly net profit of 1.75 billion rupees.

Shares in Hero Honda, which has a market worth of $3.7 billion, fell 1 percent in the June quarter, compared with a steeper 21 percent loss for the auto share index .BSEAUTO and a 14 percent decline for the main share index .BSESN.

Ahead of the earnings announcement, shares in Hero Honda ended down 4.2 percent at 728.15 rupees in a market that fell 3.9 percent. ($1=42.6 rupees) (Reporting by Rina Chandran; Editing by John Mair)