X

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.
TVS: Pressure time - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 30, 2002

    TVS: Pressure time

    After having lost market share in the motorcycle segment to its peers like Bajaj Auto and Hero Honda, TVS Motor Company (formerly TVS Suzuki) has managed to turn the tide. ‘Victor’, the company’s indigenously developed motorcycle model, has sold more than 200,000 units within a span of 8 months of launch. With one of the best research and development facility among two-wheeler companies, it hopes to increase market share through a slew of new introductions. But will it translate into higher profitability?

    Consider the growth of the motorcycle industry first. While the two-wheeler industry, as a whole, grew at a CAGR of 7% in the last five years, growth is sharper in the motorcycle segment (CAGR of 29% in the last five years). The growth is palpable when one considers industry volumes in absolute terms. Against sales of 575,000 units in 1995-96, motorcycle sales stood at 2.8 m units in 2002. During the same time, TVS grossly under-performed the industry.

    Lack of competitive models, predominantly southern oriented sales and diversification into other segments like scooters had a negative impact on topline growth. The company’s motorcycle market share that stood at almost 23% in FY99 declined to 16% in FY02. But ever since the launch of ‘Victor’, TVS has managed to arrest the slide in market share and in 1QFY03, its share in the pie has touched 18%.

    But the important question is where to from here? Though ‘TVS Victor’ has been well received by the market, the past track record on the product front fails to inspire confidence. TVS had earlier discontinued production of ‘Shaolin’ and ‘Shogun’ due to their unviability. Besides, its ungeared scooter ‘Spectra’ was re-launched for the third time in a span of three years. Though it is acclaimed for its R&D facility, in a competitive industry, such failures in the future could severely dent profitability.

    Realising the growth prospects of the motorcycle segment, a number of players have entered the fray and have launched atleast two new models in FY03. Some players like Bajaj Auto and Hero Honda can afford to play the pricing game due to their strong balance sheets. While we expect price realisation to improve in FY03 for TVS, further upward trend would require constant investment in new models that requires capital expenditure. TVS’s presence in moped and ungeared scooter segments would also limit overall margin expansion.

    The stock currently trades at Rs 405 at a P/E multiple of 10x FY03E earnings. It plans to invest Rs 5 bn towards new product development and R&D facility in the next three years (Rs 2 bn in FY03 or 9% of estimated sales). If the new models fail to boost volume growth, it could have material impact on profitability.

     

     

    Equitymaster requests your view! Post a comment on "TVS: Pressure time". Click here!

      
     

    More Views on News

    TVS Motor: Inventory Push Erodes Margins! (Quarterly Results Update - Detailed)

    May 22, 2017

    TVS Motor Company ltd has announced its financial results for the fourth quarter of the financial year 2016-17 (4QFY17).

    TVS Motor: Demonetisation Negates the Festive Growth (Quarterly Results Update - Detailed)

    Feb 17, 2017

    TVS Motor Company has announced its financial results for the third quarter of the financial year 2016-17 (3QFY17).

    TVS Motor Company Ltd: Good Festive Season, Exports Under Pressure (Quarterly Results Update - Detailed)

    Oct 28, 2016

    Good Festive Season, Exports Under Pressure!

    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.

    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.

    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...

    More
    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

    TVS MOTORS SHARE PRICE


    Aug 16, 2017 (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 - FORCE MOTORS COMPARISON

    Compare Company With Charts

    COMPARE TVS MOTORS WITH

    MARKET STATS