TVS Motor Q2: Profit, revenue may see double-digit decline amid weak demand

Two-and-three-wheeler maker TVS Motor Company is likely to report a weak set of earnings for the quarter ended September 2019 due to consistent fall in sales volumes amid weak demand.

According to brokerages, profit is expected to fall around 30 percent with 13-14 percent decline in revenue during the quarter YoY.

Volumes declined by 19 percent YoY possibly led by 24 percent YoY decline in domestic markets and 5 percent growth in exports.

Motorcycle and scooters volume dropped around 19 percent and around 14 percent YoY, while Mopeds volume declined by around 30 percent YoY. 3-wheeler volumes rose by around 9 percent YoY.

"We expect revenues to decline by 13 percent YoY in Q2FY20 largely led by 19 percent YoY decline in volumes, offset by 6-7 percent increase in ASPs YoY," said Kotak Institutional Equities which expects profit to fall more than 27 percent.

"Due to better product-mix with higher sales of premium bikes and exports, Reliance Securities also expects ASP growth of 7 percent YoY and 13 percent degrowth in topline.

Operating income and margin are likely to be impacted by negative operating leverage and discounts YoY, as well as, QoQ.

"We expect EBITDA to decline by 22 percent YoY led by revenue decline and negative operating leverage," Kotak said.

Key issues to watch out will be an update on demand from rural and urban areas, exports outlook for 2-wheeler and 3-wheeler in key markets, and update on new product launches including electric vehicle.