Telco commercial vehicle sales slowdown - Views on News from Equitymaster

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

  • MyStocks


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

Telco commercial vehicle sales slowdown

Jul 11, 2000

Tata Engineering and Locomotive Company Ltd (TELCO)'s aggregate volumes for the month of June'2000, have reported a decline of 11% YoY. The segments which have contributed to this fall are heavy, medium and light commercial vehicles (H & MCVs). On the positive side utility vehicles have gone up by 5% YoY and passenger cars by 12% YoY for the month of June'2000. TELCO, is India's largest commercial vehicle manufacturer. It dominates the MCV/HCV segment with a market share of 66%, the LCV segment with a 67% market share, and utility segment with 26% market share. It reported a turnover of Rs 64 bn in FY99. Its plants are located at Pune, Jamshedpur and Lucknow.

% change
M & HCV 5,676 3,850 -32.2%
LCV 2,974 2,700 -9.2%
Utility 2,100 2,204 5.0%
CV and utility sales 10,750 8,754 -18.6%
Cars 3,656 4,096 12.0%
Total sales 14,406 12,850 -10.8%

On a year to date basis the decline in H& MCVs has been lower at 4% as in the months of April and May'2000 cumulatively they reported a growth of 12% YoY. Hence the figures of June'2000 do signal a slowdown in sale of commercial vehicles. On a month on month basis for June'2000 over May'2000, H & MCVs have grown by only 2%, while for the corresponding period of the previous year (June'99 over May'99) the growth was 55% MoM.

  April-June (YTD) volumes    
(% change)
(% change)
M & HCV 8,105 12,349 11,327 52.4% -8.3%
LCV 7,658 7,817 7,008 2.1% -10.3%
Utility 7,843 5,409 6,158 -31.0% 13.8%
CV and utility sales 23,606 25,575 24,493 8.3% -4.2%
Cars 279 7,820 14,450 2702.9% 84.8%
Total sales 23,885 33,395 38,943 39.8% 16.6%

The strong growth in FY2000 can be attributed to the pick up in the economic scenario. This resulted in higher demand for commercial vehicles during the year. The growth figures for FY2000 over FY99 are high as these are on a lower base in FY99, when the commercial vehicle segment went through a tough time as it was saddled with low demand and high dealer inventories.

TELCO's market share in the utility vehicle segment is expected to go up in the current year. The company had lost market share in FY2000, but has become aggressive on product launches. It has successfully launched the Sumo variants to counter the competition for different market niches. The slowdown in commercial vehicle sales can be attributed to imposition of unified sales tax rate in some parts of the country. This has acted as a dampener on sales as price of commercial vehicles has gone up.

The company’s car division continues to be a drag on profits. The company expects to break even on the Indica by the end of FY2001. FY2001 does not look very attractive as the company would have to continue to bear costs associated with Indica and Cummins engines. As a result the company will start showing improvement in their margins and profitability FY2002 onwards.

On valuation terms, Telco's stock is trading at a price to earnings multiple of 47x FY2000's earnings.

Equitymaster requests your view! Post a comment on "Telco commercial vehicle sales slowdown". Click here!


More Views on News

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.

Eicher Motors' Earning Meets Estimate. Stock Under Pressure Amid CEO Exit and Chip Shortage (Views On News)

Aug 13, 2021

Robust performance by Royal Enfield in the international market gives a lift to Eicher's topline.

4 Ways to Play the EV Opportunity (Views On News)

Sep 6, 2021

The EV disruption is happening faster than you think. Here's how you can ride the Indian EV megatrend.

Semiconductors Are Big News. Here's What You Should Know... (Views On News)

Jul 27, 2021

The global semiconductor chip shortage is likely to continue till 2022 before it eases gradually.

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.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.


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


Dec 7, 2021 11:41 AM