TVS Motor Company - In-line quarter - IDBI Capital

TVS Motor (TVSL) Q2FY13 results were largely in line with estimates, with minor miss led by marginal revenue miss (lower than expected realization).

The company has seen improved demand environment so far during the festive season (marginal growth vs. last year's festive season) and hopes to build up on the momentum during the rest of the season. However, negative surprise came from newly launched Phoenix, which is slated to retail only from Nov'12 onwards (vs. our expectation of festive season retails) and hence will lose out partially on the festive momentum. It also sounded cautious on the exports front, with recovery expected not before next 6 months.

Q2FY13 revenue fell 15%/7% YoY/QoQ to Rs16.9 bn (IDBIe Rs17.3 bn), led by 20%/6% dip in volumes, while realization was up 6%/(1)% to Rs34.8k/vehicle. The company stated that volume momentum has been healthy in festive season so far and expects the same to continue going forward. However, newly launched Phoenix volumes will start retailing only in Nov'12 and it may lose out partially on the festive demand.

EBITDA was largely in line at Rs1 bn, down 27%/6% (IDBIe Rs1 bn), with EBITDA margin at 6%, down 100bps/up 10bps (IDBIe 6%). Though management expects margin to improve led by improved volumes and benign raw material price environment, we believe that in the subdued demand environment, TVSL margin will remain under pressure, given weak product profile and consequent need for higher discounts and ad spends. APAT at Rs452 mn, down 41%/12% was tad below estimate of Rs484 mn, with deviation led by marginally revenue miss. Most other financial parameters were in line with estimates.

We maintain our FY13/14 standalone earnings at Rs4.1/Rs5.4. Upgrade to HOLD from REDUCE, post correction of ~15% over past one month), with price target of Rs39 (9x FY14 standalone earnings less 1x accumulated losses in Indonesia venture).

Source : Equity Bulls

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