TVS Motor profit drops 13%2 min read . Updated: 27 Jul 2012, 10:24 PM IST
TVS Motor profit drops 13%
Chennai: TVS Motor Co. Ltd, India’s fourth-largest two-wheeler maker, posted a 13% drop in first-quarter net profit as it stepped up investments across brands.
“Profits are lower due to significant increase in brand investments across key brands, including TVS Wego, TVS StaR City and TVS Sport along with the recently introduced Apache RTR and Scooty Pep," said the company in a statement.
The two wheeler segment is witnessing stiff competition with several new launches. Bajaj Auto, the second-largest motorcycle maker introduced two models in the April-June quarter—Pulsar 200 NS and Discover 125 ST. In July, Honda introduced its 110cc Dream Yuga motorcycle, the company’s first mass-market model. And the country’s largest two-wheeler maker, Hero MotoCorp, launched the 125cc Ignitor motorcycle early this month.
TVS Motor, which was dislodged by Japanese auto maker Honda from third place, is seeking to regain market share with its new launches.
The 34-year-old TVS Motor will introduce a new executive segment motorcycle in the second quarter of the year that it hopes will lead to improved profitability. It will also add a new scooter to the range later in the year to help boost sales volume and complete its portfolio, which currently has 10 products.
“These launches are crucial for the company to get (things) right. As it is, Honda is strong in the scooter segment and Hero is strong in the motorcycle segment, so there is increased pressure on TVS Motor’s market share," said Yaresh Kothari, an analyst at Angel Broking.
The total sales volume for the quarter under review remained flat at 547,000 units.
The company faces several challenges, analysts said. “We may see only 8-10% growth in the two-wheeler segment in FY13, versus the 16% growth the segment saw in FY12, as overall demand is still low," Kothari said.
The Society of Indian Automobile Manufacturers (SIAM) industry lobby maintained its growth outlook for two wheelers at 11-13 % for 2012-13, but warned of a possible negative impact from deficient rainfall.
While the Sensex lost 8.64% in the last one year, TVS Motor lost 24.25% of its value, while Bajaj Auto gained 10.24% and Hero MotoCorp gained 11.36% in the same period, making TVS one of the worst performing two-wheeler stocks.
On Friday, TVS Motor’s stock gained 0.13% to end trading at ₹ 37.80, while the benchmark Sensex rose 1.2% to 16,839.19 points.
“If the new launches are able to generate better demand for the company, we may see a better outlook for TVS Motor," said Kothari of Angel Broking.