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TVS Suzuki (TSL) has reported net sales of Rs 3.7 bn (up 33% YoY) and a net profit of Rs 212 mn (up 10%) for the quarter ending 30th June 1999. - Views on News from Equitymaster
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  • Jul 27, 1999

    TVS Suzuki (TSL) has reported net sales of Rs 3.7 bn (up 33% YoY) and a net profit of Rs 212 mn (up 10%) for the quarter ending 30th June 1999.

    TVS Suzuki (TSL) has reported net sales of Rs 3.7 bn (up 33% YoY) and a net profit of Rs 212 mn (up 10%) for the quarter ending 30th June 1999.

    TVS Suzuki Ltd. (FY99 Turnover Rs 13.1 bn) is a joint venture between Sundaram Clayton (TVS Group) and Suzuki Motor (Japan). It operates in all the three segments of the two wheeler market - motorcycles, scooters and mopeds.

    The company has reported a drop in net profit margins to 5.7% from 6.9% in the previous year. This is mainly due to the company's efforts to boost sales by offering discounts on its motorcycles. Also, TVS Suzuki, which incurred heavy capital expenditure in setting up a scooter assembly line, had to absorb a larger amount of depreciation (up 27% YoY) during the quarter, which further pulled down the growth in net profits.

    TSL's entry into the scooter segment has been an uphill task mainly due to the existing competition. Moreover, the company had introduced a scooter that was more upmarket, as a result of which the sales targets have not been achieved. Therefore, TSL is introducing a cheaper variant of the scooter, which the company hopes will generate the volumes that were first envisaged. This should augur well for the top line of the company.

    The scooter and motorcycle segments are witnessing cutthroat competition in the domestic markets. This will result in lower margins for the players, who will then have to increase volumes to push the growth in bottomline. Therefore, TSL will have to rapidly develop sales volume to become more competitive vis a vis its peers, if it wants to become a major player in the Indian two wheeler market.

    Market View:
    Analysts have rated the stock as a 'BUY' mainly on account of the proactive nature and the track record of the management. The company's initiatives in making its vehicles Euro II complaint have lent support to this rating. However, some analysts have rated the stock as a 'SELL' as they are skeptical of the company's scooter venture.



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