It seems you have worn rings and/or barrel and piston. You will have to get the barrel off the engine to ispect. Unbolt the carb and exhaust from the engine. Unbolt the 4 nuts on top of the head. Remove the head and barrel from the engine. Inspect the piston for scoring and wear. Remove the piston by removing the circlip next to the gudgeon pin. Do not drop the clip into the engine.(stuff some clean rags in the engine under the piston. The gudgeon pin can now be pushed out of the piston and the piston removed.Have the barrel and piston measured for wear.
If you're on a tight budget you can replace rings only but this is a penny wise pound foolish solution. You'll have the same problem in 2 months time.
It is best to rebore the barrel and fit an oversize piston and new rings. The barrel can also be resleeved but this is a more costly option and should only be exersized if you cannot obtain an oversize piston.
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