Hero Honda's May sales , that grew over 12%, have allayed fears that there's a slowdown in the motorcycle segment.

By 11:20 IST, the stock of world's largest motorcycle manufacturer climbed 3.25% to Rs 220.80. It, however, came off the high of Rs 224.40. Close to 54,000 Hero Honda shares were registered as volumes on BSE thus far.

In the eight sessions between 20 and 30 May 2003, Hero Honda has lost 10.5% to Rs 213.85 from Rs 239. Between 22 April and 20 May 2003, the scrip had risen 33% from Rs 180.10 on 22 April 2003.

For May 2003, the company recorded an impressive 12.3% rise in vehicle sales to 1,63,579 units. Month-on-month, sales jumped 22% from 1,34,318 units in April 2003.

Perhaps the launch of the CD-Dawn had much to do with this invigorated performance. CD-Dawn is the cheapest 100cc motorbike launched by Hero Honda. It carries a showroom price of Rs 31,899. The company expects to sell 7,000-8,000 units of the bike in the initial months and hopes that sales will soar to 20,000 a month in six months time. The rise in sales was also due to the increased demand what with the end to the recent truckers' strike, which had hurt sales in April 2003.

However, analysts feel a sure insight to Hero Honda's health will only become obvious with the company's performance over the next two months.

Analysts are also a little apprehensive about the prospects for the scrip. They say the stock was moving strong of late on buying support due to the attractive dividend yield. For 2002-03, the company had recommended a huge dividend of Rs 18 per share (900%). Once the record date is over, the stock may come off, market watchers feel .

The company, which has a 45% share of the domestic market for motorcycles, has been witnessing sluggish demand and intense competition in recent months. Analysts expect an earnings de-growth in FY 2003-04 due to pressure on the company's margins. Hero Honda derives nearly 80% of its sales volumes from the Splendor and Passion motorcycle models. The executive segment, being over crowded, pricing pressure will continue to increase in the coming months, according to analysts.

For the quarter ended 31 March 2003, Hero Honda posted a net profit of Rs 148.96 crore (Rs 152.56 crore) on total income of Rs 1,248.20 crore (Rs 1,285.69 crore).

For the year ended 31 March 2003, the company's net profit stood at Rs 580.76 crore (Rs 462.39 crore) on total income of Rs 5,194.55 crore (Rs 4,539.49 crore).