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: 2QFY04 PAT up 20% - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Oct 16, 2003

    TVS: 2QFY04 PAT up 20%

    TVS Motor Company, the country's third largest player in the two-wheeler segment, has posted a 8% rise in sales and a 20% growth in net profit for 2QFY04. The rise in net profit was on account of marginal improvement in operating margin and a sharp spurt in other income.

    (Rs m) 2QFY03 2QFY04 Change (%) 1HFY03 1HFY04 Change (%)
    Sales 7,051 7,646 8.4% 13,350 14,271 6.9%
    Other Income 37 91 143.2% 59 176 197.6%
    Expenditure 6,434 6,962 8.2% 12,172 12,991 6.7%
    Operating Profit (EBDIT) 616 683 10.9% 1,178 1,279 8.6%
    Operating Profit Margin (%) 8.7% 8.9%   8.8% 9.0%  
    Interest 8 12 59.2% 35 25 -27.8%
    Depreciation 152 190 24.8% 285 358 25.5%
    Profit before Tax 494 572 15.9% 917 1,072 16.9%
    Tax 185 202 9.2% 341 382 11.9%
    Profit after Tax/(Loss) 309 370 19.9% 576 691 19.9%
    Net profit margin (%) 4.4% 4.8%   4.3% 4.8%  
    No. of Shares (eoy) (m) 23.1 23.1   23.1 23.1  
    Earnings per share (Rs)* 53.4 64.1   49.9 59.8  
    P/E (x)         15.0  

    Total volumes sold for 1HFY03 has increased by 3% with the ungeared scooter segment largely driving volume sales in contrast to the trend in FY03 when motorcycle segment was the growth driver. As we had mentioned in our FY03 analysis, it will be difficult for the company to grow volumes having reached an average monthly sales of 64,000 units. Despite new launches in recent past in the motorcycle segment (primarily upgrades of 'Fiero' and 'Victor), volume growth is on the lower side. In fact, as evident from the table below, total volumes have actually declined in the September quarter. Given this backdrop, we expect TVS to have lost market share in the motorcycle segment by around 100 basis points. At the same time, export volumes have doubled to more than 9,000 units.

    With the launch of the upgraded version of its ungeared scooter model, 'Scooty', TVS has managed to grow volumes significantly, and the same is reflected in the table below. We expect this segment to grow by around 15% for FY04. Led by this new launch, we expect TVS' market share to touch 20% in the scooter segment compared to 18% in FY03. Bajaj has been uncompetitive in this segment in the last one year in light of an aged product portfolio, which has worked in favour of TVS and Honda Scooters. But Bajaj is slated to launch a new ungeared scooter in the second half of this fiscal. As expected, moped segment continues to lose out to motorcycle and ungeared scooters with domestic industry volumes falling by 17% in 1HFY03.

    Second quarter performance…
    Sales (Nos.) Sep'02 Sep'03 Change (%) 1HFY03 1HFY04 Change (%)
    Motorcycles 68,335 64,958 -4.9% 347,182 363,127 4.6%
    Scooterettes 12,927 18,201 40.8% 81,120 93,563 15.3%
    Mopeds 21,855 22,830 4.5% 131,947 121,271 -8.1%
    Total 103,117 105,989 2.8% 560,249 577,961 3.2%

    Operating margins have increased by 20 basis points in 2QFY03, to 9% levels, which is lower compared to Hero Honda (16% in 2QFY04). Unlike Hero Honda, TVS has a diversified product mix with presence in ungeared scooters and mopeds. This, combined with lack of adequate reach to grow volumes, limits margin expansion potential for TVS. We expect TVS' margins to consolidate at 10% levels in the medium term of 1 to 2 years.

    Depreciation charges have risen by 25%, as TVS is expected to incur capital expenditure of Rs 5 bn per annum for the next three years. Despite strong operating cash flows, the rise in interest costs has come as a surprise in 2QFY04. Excluding the other income component in both the quarters, net profit growth stands at 3% as against 20% at first sight.

    The stock currently trades at Rs 898, implying a P/E multiple of 14x FY04E earnings. Valuations are on the higher end on a peer valuation basis. The risk profile of the stock is also on the higher side in light of significant capital expenditure plans of the company (this includes a proposed entry into the three-wheeler market). Given the strong balance sheet of competitors like Hero Honda and Bajaj and the competitive motorcycle segment, further expansion in margins and robustness in revenues could be limited.

    The company has proposed a stock split (face value from Rs 10 to Rs 1) and a interim dividend of Rs 6 per share (1% dividend yield).



    Equitymaster requests your view! Post a comment on "TVS: 2QFY04 PAT up 20%". 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...

    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 (Close)


    • 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


    Detailed Quarterly Results With Charts