TVS Motor’s net profit up 137%, stock steadies

TVS Motor Company’s results do not show an improvement over the September quarter, as sales and net profit rose by just 2% each. But it has done much better over the year ago period.

TVS Motors, the Chennai-based two-wheeler company, with a market capitalization of Rs 2,947 crore saw its December 2010 quarter sales increase by just 2% over the September quarter to Rs 1,647 crore. Net profit too rose by 2% sequentially to Rs 56 crore.

Sales rose by 51% and net profit rose by 137%, compared to the same period a year ago. Its operating profit also rose by 69% to Rs 73 crore

TVS Motors’ operating profit margins have remained in the 4-5% range, in the past few quarters. Its margins are much lower compared to its competitors such as Bajaj Auto and Hero Honda Motors. Its net profit margin (OPM) has remained stable at 3% in the past few quarters.

Note that TVS Motors’ other income rose sharply to Rs 7 crore, nearly twice that of the preceding quarter’s Rs 2.5 crore. If not for this, profit growth would have been slower.

It has to compete with bigger rivals such as Bajaj Auto and Hero Honda. The margins of TVS motors are much lower than that of Bajaj Auto, the net profit margin of which is 16%. For FY 09-10, the market share of TVS motors in the domestic market stood at 10% (refer: latest annual report).

TVS Motors’ total two-wheeler sales grew 39% year on year to 3.72 lakh units. The year on year growth of motorcycles is 40% to 2.11 lakh units and that of scooters is 64% to 1.24 lakh units. Three wheeler sales increased to 10,079 units from 3,225 units for Q3 FY09-10. Higher demand for its TVS Wego product has helped it boost scooter sales growth, where it has a market share of over 20%.

The share price of the company steadied during the week, closing at Rs 62, a little higher than its weekly low of Rs 57.50.
The company has said that growth in 2011-12 due to an improved sales network and portfolio. It added dealerships in two new provinces during the quarter to take its total coverage to 15 and will launch upgraded models of the TVS Apache and TVS RockZ in the March quarter.

Read the TVS Motors press release on its financial performance here and on its vehicle sales here.

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