Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Telco: Advantage size - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 12, 2002

    Telco: Advantage size

    It has been an eventful first five months of the current fiscal year for commercial vehicle (CV) manufacturers. After remaining sluggish more almost three years, volume growth in recent months clearly suggests that the worst is behind them. But slower economic growth projections in FY03 could cap demand towards the second half of the current financial year.

    Consider the reason for the spurt in CV sales first. One of the key growth drivers of CV demand in FY03 is the sharp spurt in agricultural output in FY02 (7% rise in absolute terms). Industrial sector that has been languishing over the last three years has also exhibited growth in the first five months of the current fiscal year (average of around 2.2% rise in industrial output). With more tonnage to carry in the current fiscal, the rise in demand for CVs is not surprising. Strengthening of freight rates in key trunk routes has also been another key factor, as transport operators would ideally like to capitalise on any such opportunity.

    CVs - Robustness in volumes…
    (Nos) Apr-Aug'01 Apr-Aug'02 (% change)
    M/HCV 18,799 25,871 37.6%
    LCV 10,576 12,926 22.2%
    UV 10,231 9,701 -5.2%
    Cars 22,271 28,488 27.9%
    Total 61,877 76,986 24.4%

    Apart from these, there are some structural factors as well. With road construction projects connecting the four metros in full swing, it is cost efficient to operate bigger tonnage vehicles for operators. It was estimated that close to 42% of CV demand in FY02 was led by demand for multi-axle vehicles with tonnage in excess of 16 tonnes. This could have continued in FY03 as well. Affordable interest rates and increased focus by CV manufacturers to boost volume sales by entering into hire purchase contracts with transport operators also helped in a way.

    Monthly performance…
    (% YoY change) Apr-02 May-02 Jun-02 Jul-02 Aug-02
    M/HCV 28.0% 101.4% 35.5% 16.6% 30.3%
    LCV 52.0% 30.0% 8.0% 39.4% 3.3%
    UV -4.0% -13.1% 0.3% -2.2% -4.4%
    Cars -42.2% -33.6% 50.4% 103.7% 46.1%
    Total 2.7% 10.3% 29.8% 47.3% 25.8%

    Telco, being the dominant player in the CV segment, has benefited in a large way due to a combination of all these factors in the current year. Average monthly sales for Telco in the first five months of FY03 stand at 5,170 units as against 3,760 units in FY02. One has also got to keep in mind that HCV sales also include passenger vehicle sales (buses), which has also increased noticeably in light of higher demand for CNG vehicles and fresh orders from state transport undertakings. But the surprise was from the revival in LCV sales. LCVs have been losing sheen over the years due to tonnage polarisation and competition from three wheeler carriages. Overall CV sales is up 32% YoY to 38,797 units for April-August 2002.

    Telco's market share in utility vehicle (UV) segment has been on the decline due to stiff competition from Toyota and M&M. With superior product quality, both the players have given Telco a run for its money. Despite relaunches of its UVs, one is not optimistic on the same in the future. Indica's sales, on the other hand, continue to remain robust with volumes increasing by 28% to 28,488 units for April-August 2002. The company is set to launch the Sedan version of Indica, 'Indigo', is October 2002. This should enable the company to achieve volume growth of around 75,000-80,000 units in FY03.

    As far as future growth drivers are concerned, the company has launched ‘EX’ variants in its CVs with tonnage varying from 7-35 tonne. Telco's CVs have always been vulnerable owing to the competition's superior technology. But this could change with the introduction of the new range. Overall, with its well-spread distribution network, Telco is well-poised to capitalise on any further upturn in industry volumes in the future.



    Equitymaster requests your view! Post a comment on "Telco: Advantage size". Click here!


    More Views on News

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Tata Motors Ltd: Dismal Quarter, Long way to go! (Quarterly Results Update - Detailed)

    Feb 16, 2017

    Tata Motors Ltd has announced its financial results for the third quarter of the financial year 2016-17 (3QFY17).

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Good Recovery in the Scooters market, expects pick up in exports too.

    Bajaj Auto Limited: Recovery in Exports but Domestic Disappoints! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    New Export Markets picking up, Management expects good recovery in domestic Three wheeler market.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 03:20 PM


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


    Detailed Financial Information With Charts