Q4FY20 industry appears to be challenging, primary because of the declining GDP.
Two-and-three-wheeler manufacturer TVS Motor on February 4 reported better-than-expected revenue and operating margin for the December quarter.
The company’s revenue fell 11.5 percent year-on-year to Rs 4,125 crore and profit declined 32.1 percent to Rs 121.1 crore due to lower sales.
At operating level, earnings before interest, tax, depreciation and amortisation dipped 3.2 percent YoY to Rs 363.2 crore, but margin remained above 8 percent for third consecutive quarter at 8.8 percent against 8 percent.
A CNBC-TV18 analyst poll has estimated profit at Rs 121.1 crore on revenue of Rs 4,063.7 crore and EBITDA was expected at Rs 342 crore, with margin at 8.4 percent.
Here are the highlights from TVS Motor Company's earnings call, compiled by Narnolia Financial Advisors:
Management Participants: KN Radhakrishnan – Director & CEO, K Gopala Desikan–CFO
For Q3FY20, the industry continues to decline due to lower economic growth and lack of liquidity.
Q4FY20 industry appears to be challenging, primarily because of declining GDP.
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Monsoon, though delayed, was normal, and reservoirs have enough water, which should lead to better Rabi and Kharif crops and relief measures announced in the Budget should stimulate growth.
Sales of 2W industry declined by 11 percent in the quarter.
The company has launched two variants of BS-VI: Eco Thrust Fuel injection (ET-FI) and Race Tune Fuel injection (RT-FI)
The company reversed the provision of Rs.76.04 crore toward National Calamity Contingent Duty (NCCD) based on a favourable ruling by CESTAT.
The company have changed to BS-VI in January and stopped BS-IV production. Customer’s feedbacks are very positive for BS-VI vehicles.
Inventory level stands at 5 weeks (dealer stocks).
TVS credit services finance penetration is 45 percent.
The company launched electric scooter i-cube and it is currently being sold in Bangalore in12 dealerships. The company has further plans to expand it dealerships in Mumbai, Pune, Delhi, Chennai and Trivendram.
Q3FY20 export revenue is Rs 1,200 crore. Spares revenue is Rs 441 crore.
The management expects 1HFY21 to decline due to BS-VI transition. Though some of the impact may get arrested by healthy monsoon and government’s thrust on agriculture sector.
The BS-VI transition is expected to be smooth, as 60 percent of the vehicles sold in January were BS-VI compliant.
The management expects exports market to be strong based on stability in oil prices and currency.
The recent ban on 2-wheeler & 3-wheeler taxis in Lagos, Nigeria may have some impact but it is too early to comment. Nigeria accounts for 55 percent of 3-wheeler exports and 12 percent of two-wheeler exports of TVS Motors.
The import content is expected to come down to 8 percent in FY21 from 10 percent in FY20.
Capex guidance of Rs 650 crore in FY20.
Electric scooter: Total expected capex of Rs 200 crore.Exclusive offer: Use code "BUDGET2020" and get Moneycontrol Pro's Subscription for as little as Rs 333/- for the first year.
