Accumulate TVS Motor Ltd - Emkay

Reco: ACCUMULATE
CMP: Rs 52
Target Price: Rs 61

Gross margins improve, Upgrade to ACCUMULATE

- EBITDA at Rs 1.1 bn was 5% below est, despite strong gross profit margin (26.6% vs est of 25.1%), due to higher marketing spend (~ Rs 150mn). APAT at Rs 565 mn was 7% below est.

- Lower FY12/13 vols by 4.6%/9.7% to 2.2 mn/2.4 mn units and EPS by 6%/10% to 5.4/6.1. Factor in USD/INR at Rs 49.5 in FY13 vs 47.5 earlier

- Upgrade rating to ACCUMULATE post stock price correction with a TP of Rs. 61 (10x FY13x PER). Upside risk arises from volume traction from new launches and exports

- Continue to have concerns on sustained investment in various subs (can lead to further derating of valuation multiple). In 3Q, TVS invested Rs 374 mn in subs. (Rs 1.1bn YTDFY12).

Source : Equity Bulls

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