Two-wheeler stocks fail to match industry tempo

Top three motorcycle manufacturers, Hero Honda, Bajaj Auto and TVS Motors, posted a 25 per cent growth in motorcycles volumes during the year ended March 31, 2005. The rate of growth in the two-wheeler segment as a whole, however, stood at 18.54 per cent.

Bajaj Auto continued to outperform the motorcycle market with an impressive 41.6 per cent rise in sales growth. TVS Motors motorcycle sales declined by 3.8 per cent. Hero Honda showed 26.6 per cent rise in motorcycle sales.

Bajaj Auto's market share among the three motorcycles manufacturing companies rose to 30.52 per cent in 2004-05 from 26.93 per cent in 2003-04.

The market share of Hero Honda improved further to 55.2 per cent from 54.5 per cent in the previous year. TVS' market share declined to 14.3 per cent from 18.59 per cent in the previous year.

The stock markets performance of two-wheelers stocks, however, were far from impressive. Bajaj Auto shares moved in tandem with the Sensex stocks, up 16.4 per cent in the last one year. Hero Honda appreciated by 7.3 per cent, the while share price of TVS Motors declined 22.6 per cent.

The underperformance of two-wheeler stocks was largely attributed to financial performance during the nine months ended December 2004. Sales turnover of these three companies in the first three quarters rose 20.3 per cent, while net profits showed a modest growth of 6.2 per cent.

Hero Honda posted a sales growth rate of 31.6 per cent in the nine months, while net profit rose 16.7 per cent, indicating a pressure on margins.

Bajaj Auto posted a 17.5 per cent growth in sales, however, its net profit declined by 1.6 per cent. TVS Motors' nine months sales were up 2.8 per cent, while its net profit declined by 7.2 per cent.

Bajaj Auto, which sold over a million motorcycles in 2003-04, witnessed a healthy 41.6 per cent growth at 1.44 million units in 2004-05.

For the company, sale of scooters and step-thrus continued to decline during the year. Sales of scooters were down 43 per cent, while sales of step-thrus were down 41 per cent. Three-wheeler sales were down 3.1 per cent.

The company's demand for passenger three-wheelers depends on the opening of permits in Indian states and in some of its export regions. The decline in three-wheeler sales in fiscal 2005 wa attributed to the freezing of permits in these regions.

Hero Honda showed an impressive 26.6 per cent rise in motorcycles sales in 2004-05. The company sold 2.62 million motorcycles compared with 2.07 million units in 2003-04.

TVS Motors sold 6.79 lakh motorcycles in 2004-05 compared with 7.06 lakh units in 2003-04, down 3.4 per cent. TVS launched two new motorcycles TVS Star and TVS Victor GLX in the economy and executive segments respectively during the year. With a view to cater to the demand for the TVS Star, the company plans to expand its capacity from 26,000 units to 50,000 units.