Telco: Tougher times ahead - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Telco: Tougher times ahead

Nov 10, 2000

After Tata Engineering (Telco), reported dismal second quarter results we have had to relook at out projections for the current year and the next two years. The company has reported a net loss of Rs 2.2 bn for the first half of FY01. Our previous forecast of a net loss of Rs 1.2 bn for FY01E hence seems optimistic in light of the fact that the second quarter has been very disappointing and there are no signs of a pick up in the third quarter FY01. The following are the main reasons for our forecast downgrade:

  • Decline in volume growth in the second quarter was slightly worse than our expectations. We were earlier projecting a volume growth of 6% in medium and heavy commercial vehicles (M/HCVs) for FY01. Keeping in mind, that normally the second half performance is better than the first half we were expecting a vast improvement in the second half. However, with the overall industry slowing down and M/HCVs showing no signs of a pick up, this seems unlikely.

    The recent diesel price hike has further worsened the situation. Demand from freight operators normally picks up after the monsoons and the beginning of the festive season. This year however, things are different. The prospects for the agricultural sector also do not seem bright as the monsoons have been uneven resulting in a deficit in certain states. Hence, we are now projecting a volume decline of 3% in M/HCVs for Telco in the current financial year.

  • The fall in operating margins was higher than our expectations. As the company has initiated a major cost cutting exercise in the current year, we were expecting the margins to fall but to a lesser extent. However, we now feel that the benefits of its voluntary retirement scheme as well as other initiatives will take time to show results. We are now projecting an operating margin of 3.7% in the current financial year.

  • Another reason for the forecast downgrade is extraordinary expenses on account of provision for power costs related to earlier years from 1995-96 of Rs 489 m consequent to revision of fuel cost surcharge rates by the Bihar State Electricity Board.

After taking into account the above factors we have revised our current year forecast to a net loss of Rs 3.7 bn for FY01E. The only trigger to Telco’s share price performance in the short term is rumours of a tie-up for its car project with an international car major. On the current price of Rs 84, Telco is trading at 30x FY00 EPS of Rs 2.8.

Equitymaster requests your view! Post a comment on "Telco: Tougher times ahead". Click here!


More Views on News

TATA MOTORS Announces Quarterly Results (2QFY20); Net Profit Up 117.4% (Quarterly Result Update)

Oct 29, 2019 | Updated on Oct 29, 2019

For the quarter ended September 2019, TATA MOTORS has posted a net profit of Rs 2 bn (up 117.4% YoY). Sales on the other hand came in at Rs 654 bn (down 9.3% YoY). Read on for a complete analysis of TATA MOTORS's quarterly results.

TATA MOTORS Announces Quarterly Results (1QFY20); Net Profit Down 58.4% (Quarterly Result Update)

Jul 29, 2019 | Updated on Jul 29, 2019

For the quarter ended June 2019, TATA MOTORS has posted a net profit of Rs 34 bn (down 58.4% YoY). Sales on the other hand came in at Rs 615 bn (down 8.4% YoY). Read on for a complete analysis of TATA MOTORS's quarterly results.

TATA MOTORS 2018-19 Annual Report Analysis (Annual Result Update)

Jul 5, 2019 | Updated on Jul 5, 2019

Here's an analysis of the annual report of TATA MOTORS for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of TATA MOTORS. Also includes updates on the valuation of TATA MOTORS.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 25, 2020 (Close)


  • Track your investment in TATA MOTORS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks