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Two wheelers: Good show

Nov 23, 2001

Auto stocks off late, are attracting significant buying interest on the bourses thanks to a better than expected performance for the second quarter ended September 30, 2001. Here we have consolidated 2QFY02 performance of three two wheeler majors viz. Bajaj Auto, Hero Honda and TVS Motor Company (erstwhile TVS Suzuki) to get a perspective on the sectoral performance.

(Rs m) 2QFY01 2QFY02 Change
Sales 20,387 23,966 17.6%
Other Income 821 1,251 52.4%
Expenditure 18,484 20,879 13.0%
Operating Profit (EBDIT) 1,903 3,086 62.2%
Operating Profit Margin (%) 9.3% 12.9%  
Interest 75 44 -41.2%
Depreciation 638 694 8.7%
Profit before Tax 2,010 3,599 79.1%
Extraordinary item 96 494 416.3%
Tax 708 1,503 112.4%
Profit after Tax/(Loss) 816 1,523 86.6%
Net profit margin (%) 4.0% 6.4%  
No. of Shares (eoy) (m) 342.2 324.0  
Earnings per share (Rs)* 9.5 18.8  
(*annualised)      

Following the success story of Hero Honda on the motorcycle front, the current year saw the introduction of new models from Yamaha, Kinetic Engineering and LML (apart from the big three). And it seems to have yielded positive results for all the auto majors. While Hero Honda has posted a 32.8% growth in motorcycle volumes, Bajaj Auto and TVS have registered a 14.2% and 1.1% increase in sales respectively for the first half of the current financial year. Yamaha, Kinetic and LML also witnessed notable rise in volumes in the current year.

Motorcycle stats - (Apr-September 2001)
(% change) Production Sales
Hero Honda 29.8% 32.8%
Bajaj Auto 15.3% 14.2%
TVS 6.0% 1.1%

The gradual shift in buying pattern has clearly enthused players to introduce atleast two new models per quarter to keep volume growth ticking. However, TVS was the only player to report a drop in sales (8.8%) in 2QFY02. But this could be due to the fact that the other segments of the two wheeler industry namely, mopeds and scooters are witnessing a consistent fall in volumes over the last three years. Since TVS has a significant presence in both these segments, topline growth has been affected.

Scooter and moped sales for 1HFY02 have declined by 2.7% and 33.5% respectively with TVS, Kinetic, LML and Bajaj Auto being the hardest hit. Honda Motorcycle, the latest to enter the scooter segment, has gained a market share of 3.3% in 1HFY02.

Cumulative net profit for 2QFY02 has increased by 86.6% on the back of a sharp rise in operating margins primarily led by Bajaj Auto, which saw its margins going up from 6.7% in 2QFY01 to 14.4% in 2QFY02 at the operating level. But higher tax provisioning on account of deferred taxation lowered profit growth in 2QFY02.

Second half of the current year will not be any different from 1HFY02 except for a higher growth in motorcycle volumes thanks to a good agricultural output in the current year. Moped and scooter segments would continue to suffer in 2HFY02 as well, thus affecting profitability of select players like TVS, Bajaj Auto and Kinetic Engineering.


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