Munjal Showa receded a sharp 3.7% to Rs 154.90 in morning trades today following a downturn in profitability for Q4 ended 31 March 2003.

The scrip hit an even lower Rs 153 earlier. The stock is generally thinly traded and volumes were just that today, at 2,900 shares on BSE in about one-and-a-half hours of trading.

The stock has come off its higher levels in the last few trading sessions. From a recent peak of Rs 173.10 on 12 May 2003, the stock has now come off to the Rs 155-level. It had staged a smart comeback on the bourses after plummeting to further lows in April 2003. From Rs 119 on 25 April 2003, it then surged 45.4% to Rs 173.10 on 12 May 2003.

The recent fall on the counter has come from poor Q4 results announced on 20 May 2003. For Q4 ended 31 March 2003, this leading supplier of shock absorbers to bike major Hero Honda reported a sharp fall in net profit, by  58% to Rs 4.09 crore from Rs 9.75 crore. Net sales fell 5.5% in Q4 to Rs 85.09 crore from Rs 90.10 crore.

For FY 2002-03, net profit fell 14.6% to Rs 21.39 crore from Rs 25.07 crore. Net sales went up 12.7% to Rs 356.45 crore from Rs 316.03 crore.

Munjal Showa (MSL)'s business  prospects  primarily  depend  on  the domestic two-wheeler segment,  which  currently  accounts for 96% of revenues with the balance 4% being taken up by four-wheelers.

For the two-wheeler segment MSL supplies front forks, front and rear shock absorbers and struts. It supplies gas springs for four-wheelers.

Apart  from  Hero Honda, other important customers include Honda SIEL (100% supplier),  Honda  Motorcycles  and  Scooters India (100% supplier), Maruti Udyog  (100%  supplier  for  the export models), Kinetic Motor (second supplier) and Majestic  Auto  (second supplier). 

All  these  products  are supplied as OEM products  with  the company  currently  having  no  presence in the replacement market.

About  39%  of  the  company's  equity  is  held  by  the Hero Group. Showa Corporation  currently has a 26% equity stake in MSL and supports the company by  aiding  its product  development activities through technical  support  and through machinery and designs required for making pilots and training of technicians.