Tata Engineering and Locomotives Company's (Telco) net loss has more than halved YoY in the second quarter ended September 30, 2001. The recent uptrend in medium and heavy commercial vehicle (M/HCVs) sales, the successful launch of the rechristened Indica (Indica V2) and the value engineering initiatives taken by the company has enabled it to reduce losses in the aforesaid quarter.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Earnings per share (Rs)
Passenger car and utility vehicle (UVs) sales have gone up by 13.7% to 20,447 units for 2QFY02. But the encouraging aspect is the rise in M/HCV sales, which has gone up to 18,882 units, a growth of 7.4%. Consequently, the company has managed to increase its market share to 65% in 2QFY02 as compared with 63% last year in the CV segment.
But LCV and UVs have declined significantly for the first half resulting in a 6% fall in overall volumes. While the performance of the company on the domestic front is encouraging, exports have plummeted by 43% in 2QFY02. Considering the sluggishness in industrial production for the first half and a not-so-encouraging khariff output, we expect the company to report around 7% fall in overall CV sales and a 8% rise in passenger car volumes in the current financial year.
Cars & Uvs
Telco had plans to prune the vendor list to 200 from 700 currently, in order to cut direct material costs that account for 75% of the company’s operating expenses. This along with the rationalisation in manpower by 3,800 employees last year has improved margins in the current quarter.
The company has restructured and repaid debts to the tune of Rs 193 m in 1HFY02. This has lowered interest expenses by 4.5% YoY in 2QFY02. As per the restructuring plan, Telco plans to retire debt worth Rs 5.2 bn in the next three years, out of which around Rs 2 bn will be retired in the current year itself. The company is expected to report a net loss of Rs 2,720 m for FY02 as compared with Rs 5,003 m in FY01. Given the fact that the company is the market leader in the CV segment, any upturn in CV demand will benefit Telco. This along with the second quarter performance are likely to result in a re-rating on the bourses.
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: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407