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Motorcycles takes their toll on TVS Suzuki's net - Views on News from Equitymaster
 
 
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  • Oct 19, 2000

    Motorcycles takes their toll on TVS Suzuki's net

    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.

    (Rs m) 2QFY00 2QFY01 Change
    Sales 4,206 4,694 11.6%
    Other Income 54 35 -35.5%
    Expenditure 3,762 4,294 14.1%
    Operating Profit (EBDIT) 444 400 -10.0%
    Operating Profit Margin (%) 10.6% 8.5%  
    Interest 68 57 -17.0%
    Depreciation 102 101 -1.5%
    Profit before Tax 328 277 -15.4%
    Other Adjustments - -  
    Tax 80 75 -6.4%
    Profit after Tax/(Loss) 248 202 -18.3%
    Net profit margin (%) 5.9% 4.3%  
    No. of Shares (eoy) (m) 23.1 23.1  
    Diluted number of shares 23.1 23.1  
    Diluted Earnings per share* 42.9 35.0  
    *(annualised)      

    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.

    Volumes April-August 99 April-Aug 00 % change Aug-99 Aug-00 % change
    Motorcycles 135,835 140,738 3.6% 31331 22757 -27.4%
    Mopeds 157276 161370 2.6% 32648 32697 0.2%
    Scooters 50902 63832 25.4% 10660 15694 47.2%
    Total 344,013 365,940 6.4% 74,639 71,148 -4.7%

    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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