TVS Srichakra - Q4FY13 Result Review - Angel Broking

For 4QFY2013, TVS Srichakra (TVSSL) registered a topline growth of 5.9% yoy to Rs. 368cr, in line with our estimate of Rs. 366cr. The major disappointment came at the operating margin front which contracted by 317bp on yoy basis to 4.2%, significantly lower than our estimate of 7.1%. This was attributable to the higher employee cost and other expenses as a percentage of net sales. The company reported an other income of Rs. 48cr in the quarter, which majorly consisted of one time income of Rs. 37cr (Rs. 25.5cr from profit on sale of assets and Rs. 11.5cr from profit on sale of investments). It paid a tax of Rs. 11cr. The company reported a profit of Rs. 34cr in the quarter. However, if we exclude the one time other income of Rs. 37cr, the company reported a loss of Rs. 3cr.

On annual basis, the company registered a topline growth of 4.8% and reported a net sales of Rs. 1,463cr in line with our expectation of Rs. 1,461cr. The operating margin for FY2013 stood at only 4.9% against our estimate of 5.6%. The company reported a profit of Rs. 36cr, however if we exclude the other income of Rs. 37cr, then it would have a loss of Rs. 1cr against our estimation of a profit of Rs. 5cr.

However, we expect that the company's sales and operating margin will improve by FY2015E with the expected recovery in the demand for two wheelers and slight softening in the rubber price. The company has recommended a dividend of Rs. 7.5 per share. At the CMP, the stock is trading at a PE of 4.4x on FY2015E earnings. On account of the low valuation, we recommend Buy on the stock with a target price of Rs. 252 based on a target PE of 6.0x for FY2015E.

Source : Equity Bulls

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