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TVS Motor Company Ltd Research Report - 01st Feb 2016

Automobile | Published on Feb 01st 2016


In line numbers adjusted for one offs: TVS Motor Company (TVSM)’s 3QFY2016 results adjusted for one-off items have come in in line with our estimates. Revenues grew 11% yoy to Rs2,940cr, driven majorly by an 8% yoy growth in volumes. Market share gains on back of success of new launches enabled TVSM to post healthy volume growth during the quarter. Realisation/vehicle grew about 3% yoy to Rs41,868 driven by a better product mix. During the quarter TVSM reported one-off expenses of Rs12.4cr (Rs7.5cr towards damages caused by Chennai floods and Rs4.9cr towards increase in bonus expenses retrospectively from April 2015). Adjusted for one-off items, the operating margin came in at 7.3% which is in line with our estimate. The adjusted net profit at Rs120.7cr was in line with our estimates. Outlook and valuation: The two wheeler industry is expected to recover in FY2017 on back of implementation of Seventh pay commission and recovery in the rural demand. Also, TVS Motor is likely to continue gaining market share on back of new product launches and expanding geographical presence. Further, the realization/vehicle is likely to improve given the increased proportion of the non-moped segment. TVSM margins are also likely to improve as volumes pick up, given the benefits of operating leverage, gradual reduction in marketing expenses and reduction in material prices due to better vendor negotiations. We expect TVS Motor to report revenue and Net profit growth of 16% and 53% respectively in FY2017. We maintain our positive view on the stock and assign “Accumulate” rating on the stock with a revised price target of Rs322 (based on 22x FY2017 earnings).

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CMP 295
Target Price 322
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)18,778.33
MCAP NSE (Rs in Cr)18,802.08
P/E (x)40.21
EPS (Rs.)9.83
BV (Rs.)40.77
Div Yield (%)0.63
FV (Rs.)1.00
P/BV (x)9.70
EV/Sales (x)1.73
EV/EBITDA (x)24.24

Shareholding Pattern (%)

Public & Others11.0
Grand Total100.0

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