TVS Motor Co. Ltd is riding high on the success of Jupiter,
its new scooter. The company, which launched Jupiter in 2013-14,
registered a 10% volume growth in the March quarter. More than 70% of
the incremental growth in sales volumes came from scooters. As the
company launched Jupiter in new cities, scooter sales jumped 38% in the
last quarter. Excluding scooters, volume growth would have been a mere
3.5%.
Unisex appeal and multi-utility value is driving gearless-scooter sales. Bajaj Auto Ltd, which does not have a gearless scooter, has seen sales fall 4% in the March quarter. Hero MotoCorp Ltd sells scooters and has seen its volumes grow by 4%.
Scooters are usually cheaper than motorcycles. As the
market for scooters is expanding, companies selling them are registering
better volumes.
Exports were strong. Compared with the March quarter of
2012-13, exports on an average grew 33%. On a lower base, three-wheeler
sales also rose at a robust pace of 50%. The strong growth in
three-wheelers (which are high-value products) and exports helped the
company improve overall realizations. The favourable product mix
resulted in a 21% rise in revenues.
Even though raw material and employee benefit expenses increased, better realizations and strong volumes meant TVS was able to overcome the cost pressures. Operating profit jumped 47%. Operating margin expanded 115 basis points to 6.4%.
One basis point is a hundredth of a percentage point.
Aided by new product launches and upgrades, the company
is expecting to do even better in 2014-15. “With improved product
presence in various segments of the industry, TVS Motor Company expects
to better its performance in the ongoing fiscal,” the company said in a
statement.
Volume growth is expected to be driven by scooters.
Jupiter will help the firm post healthy volumes and profits in the
current and next fiscal years, analysts say.
TVS Motor Co.’s sales volume is likely to expand at a 8%
compounded annual growth rate (CAGR) in 2014-16, driven by scooter
sales, which translates into growth of 20% CAGR in company’s net profit
over the same period, Karvy Stock Broking Ltd said in a note.
While the stock is reflecting some of the optimism—it has
more than doubled in the past one year—an improvement in the domestic
economy, and motorcycle sales can help it continue its outperformance.
sumit kumar singh
pgdm 1 year
s high on Jupiter success
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