Dismal volumes drive down TVS's net - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Dismal volumes drive down TVS's net

Apr 23, 2001

TVS Suzuki, a leading manufacturer of motorcycles, mopeds and scooters has reported a net profit of Rs 612.5 m for FY01, a decline of 30% YoY. The company's sales grew by 15% YoY to Rs 18.6 bn in FY01, which was driven mainly by higher realisations as total volumes grew by only 4% YoY. These results are worse off than ours and market expectations. We had expected a 13% YoY drop in net profit for FY01.

(Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
Sales 4,419 4,498 1.8% 16,161 18,582 15.0%
Other Income 32 23 -29.6% 100 100 0.0%
Expenditure 4,013 4,311 7.4% 14,426 17,202 19.2%
Operating Profit (EBDIT) 406 187 -54.0% 1,736 1,379 -20.5%
Operating Profit Margin (%) 9.2% 4.2% 10.7% 7.4%
Interest 42 12 -70.6% 211 150 -28.6%
Depreciation 115 121 5.2% 425 470 10.6%
Profit before Tax 282 77 -72.8% 1,199 858 -28.5%
Other Adjustments - - - -
Tax 62 34 -44.9% 325 245 -24.5%
Profit after Tax/(Loss) 220 42 -80.8% 874 613 -29.9%
Net profit margin (%) 5.0% 0.9% 5.4% 3.3%
No. of Shares (eoy) (m) 23.1 23.1 23.1 23.1
Diluted number of shares 23.1 23.1 23.1 23.1
Diluted Earnings per share* 38.1 7.3 37.8 26.5
*(annualised)

The main reasons for the discrepancy is that the company's performance in 4QFY01 has been worse off due to a slowdown in rural demand. Besides, higher competition and increase in marketing and advertising costs has lead to a huge drop in operating margins from 9.2% in 4QFY00 to 4.2% in 4QFY01.

For 4QFY01, the company has reported a dismal 81% YoY drop in net profit. The company's 4QFY01 sales at Rs 4.5 bn has reported a growth of only 1.8% YoY. The main reason for this huge decline in 4QFY01, is the fact that the two wheeler industry as a whole has slowed down in the past couple of months. Specifically, volume growth in the motorcycle and mopeds segment, has started tapering off due to a decline of around 2% in agricultural production in FY01. Rural demand has slowed down due to lag effect on rural incomes.

TVS gets around 84% of its sales volumes from motorcycles and mopeds. The sharp decline in TVS's mopeds in 4QFY01 by 18% YoY has resulted in an overall decline in this segment by 4% for FY01. Infact for the first nine months of FY01, the company had reported a 1.2% YoY growth in moped volumes.

In motorcycle volumes too the company has reported a growth of 8.6% YoY for FY01. However for the 1st three quarters the growth was higher at 11%. The growth in this segment in 4QFY01 tapered off to only 2%.

Volumes FY00 FY01 YoY% 9m FY00 9m FY01 YoY% 4QFY00 4QFY01 YoY%
Motorcycles 326,357 354,505 8.6% 239,980 266,614 11.1% 86,377 87,891 1.8%
Mopeds 381,850 366,479 -4.0% 278,456 281,934 1.2% 103,394 84,545 -18.2%

As competition too has picked up in motorcycles, the company's operating margins during the year have been under pressure. The entry of Bajaj Auto has resulted in TVS loosing market share in the 4 stroke 100 cc motorcycle segment.

Higher expenses on account of marketing, staff expenses and raw materials as well as pressure on price realisations has resulted in a decline in operating margins to 7.4% in FY01.

In the current financial year too we believe the company's margins will be under pressure due to more competition in all three segments as well as a slowdown in overall two wheeler demand. Threat of cheaper Chinese imports too looms over the industry.

On the current price of Rs 103, TVS is trading at 3.9x FY01 EPS of Rs 26.5. As these results are lower than ours and market expectations, we will be downgrading our forecasts for TVS Suzuki for FY02E and FY03E by 15%-20%.

Equitymaster requests your view! Post a comment on "Dismal volumes drive down TVS's net". Click here!

  

More Views on News

TVS MOTORS Announces Quarterly Results (2QFY22); Net Profit Up 26.4% (Quarterly Result Update)

Oct 26, 2021 | Updated on Oct 26, 2021

For the quarter ended September 2021, TVS MOTORS has posted a net profit of Rs 2 bn (up 26.4% YoY). Sales on the other hand came in at Rs 65 bn (up 23.4% YoY). Read on for a complete analysis of TVS MOTORS's quarterly results.

TVS MOTORS 2020-21 Annual Report Analysis (Annual Result Update)

Sep 6, 2021 | Updated on Sep 6, 2021

Here's an analysis of the annual report of TVS MOTORS for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of TVS MOTORS. Also includes updates on the valuation of TVS MOTORS.

TVS Motor Reports Substantial Rise in Net Profit for Q4 (Views On News)

Apr 28, 2021

Key takeaways from TVS Motor's Q4FY21 results.

Massive Surge in the Shares of Tata Motors Today. Key Factors Favouring the Rally (Views On News)

Oct 13, 2021

Tata Motors zooms 23% after report of TPG investing Rs 75 bn in EV arm.

India's Edge in Electric Vehicle Stocks podcast (Views On News)

Sep 9, 2021

India has a huge advantage in using climate friendly EV batteries.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

TVS MOTORS SHARE PRICE


Nov 26, 2021 (Close)

TRACK TVS MOTORS

  • Track your investment in TVS MOTORS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

TVS MOTORS - BAJAJ AUTO COMPARISON

COMPARE TVS MOTORS WITH

MARKET STATS