The YoY increase in RE volume for the month of April 2016 was 42%. The growth rates for Jan, Feb and Mar 2016 were 65%, 63% and 52% respectively. So even if RE maintains a 40% YoY increase for the rest of the months, then we are looking at sales of around 7.2 lakh motor cycles in FY17. If this is the case the capacity expansion should happen sooner than expected.
However in the conference call transcript, Siddharth Lal had mentioned that they plan to manufacture 6.75 lakh motorcycles in FY17. This new forecast was revised upwards from an earlier forecast, of 6.2 lakh motorcycles, due to the continued strong demand. So even promoters sometimes underestimate the demand for their businesses
Another excerpt from the all transcript.
Normally what we do is once we get to a number… not an exact number but once we get to a certain hit rate we then try and steady that for a couple of months before pushing forward to the next hit rate whether it is for us or for supplier is another thing. So right now this is our slightly steady phase rather than growth phase in Manufacturing and then of course we will push it up a couple of notches in a few months’ time.
So it looks like the management is trying to see if the demand is sustaining, and if it does for a few months in a row they will increase the capacity. So it might be unrealistic to expect 40% increase in volumes YoY. Obviously this is assuming that on the exports front status quo will be maintained. If there are any positive surprises there, the management might have to increase capacity sooner than planned.