Tata Engineering (Telco) has reported a loss in the first quarter of the current financial year. The company continues to hit by the economic slowdown. Sales for 1QFY02 have dropped by 5.6% to Rs 16,974 m. Sales of CVs, UVs and exports have declined by 21.9%, 10.0% and 24.5% respectively during the first quarter. However, there is something to cheer about. The loss reported by the company at Rs 989 m is lower than market expectations.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Diluted number of shares
Earnings per share (Rs)
The market for commercial vehicles continues to remain subdued in light of the slow down in industrial production and lacklustre rural demand. Overall industry volumes have fallen by 14% in the first quarter and the medium-heavy commercial vehicle sales continue to remain depressed. The scenario is not different for passenger car and utility vehicles also. A 24.5% fall in exports to 2,326 units is a cause of concern because Telco's management had identified exports to be one of the key drivers of growth for the company in coming years.
The slow down effect...
UVs & Cars
The slow down in sales has forced Telco to cut back production. Aggregate production in the first quarter has fallen by 21.8% to 35,834 units. Production of CVs and UVs (including cars) have dropped by 21.3% and 22.2% respectively.
On the positive side, Telco has managed to cut costs by 6.0% and as a result, margins have gone up by 40 basis points to 7.4% in 1QFY02. The company has also lived up to its promise of realigning debt and efficiently utilising working capital, which has been a drag on the company's profitability. Interest cost has come down by 3.9% to Rs 1,021 m in 1QFY02.
Extraodinary item include Rs 323 m towards deferred revenue expenditure and Rs 80 m towards employee separation costs. Net loss in 1QFY02 stands at Rs 989 m as compared to Rs 743 in the correponding quarter of the previous year.
The stock has reacted positively to the annoucement of the results. At close, Telco was up over 10% at Rs 78.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407