TVS Suzuki has reported a net profit of Rs 202 m for the 2QFY01, a decline of 18% YoY. The company's sales went up by 11.6% to Rs 4.7 bn during this period. However operating expenditure went up by 14% in the 2QFY01 resulting in a fall in operating margins.
The operating margins declined from 10.6% in the 2QFY00 to 8.5% in the 2QFY01.
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The company's sales have slowed down in the current year. In the motorcycle segment the company is facing competition from Bajaj Auto. For the first six months of the current financial year the company's market share in the motorcycle segment has reduced to 18% as compared to 20% in the FY2000. For the month of August 00 the company's motorcycle volumes fell by 27% YoY.
In the 1QFY01, TVS's total volumes went up by 13%, hence sales have slowed down in the months of July and August 00, especially in the motorcycle segment.
In terms of higher costs, TVS has had to spend on upgrading some of its models to make them compliant with emission norms and its marketing and raw material costs have gone up due to new product launches. This has put a pressure on the company's margins and we expect this to continue.
The company has plans of relaunching its four stroke scooter the 'Spectra'. The company had introduced the 'Spectra' model to the market in September 1998. However this model had not done well due to technical problems and its pricing, which was on the higher side. The company is also working on launching a new version of its four stroke bike the 'Fiero" in the current year.
On the current price of Rs 147, TVS is trading on a price to earnings multiple of 3.9 x FY2000 earnings.
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