TVS Motor - Strengthening scooter sales and exports - ElaraCapital

- TVS Motor posted growth of 7% YoY to ~177K units, largely in line with estimates, led by the outperforming scooter and export segments

- Domestic volume remains subdued, growing 3% YoY, on the back of a muted demand scenario. Exports, on the other hand, continued growth momentum, posting 31% YoY to 28,782 units with 2W and 3W contributing positively

- On an overall basis, motorcycle sales, which had gained traction post the launch of Phoenix in the executive space where TVS was absent, recorded subdued growth of 2.9%. This trend was much anticipated, and, going ahead too, with base rising, motorcycle sales is expected to moderate

- On the other hand, with newly launched Jupiter, scooters have outperformed again, posting growth of 37% YoY to 41,990 units, though a 7% MoM fall indicates the monthly run-rate is likely to stabilize around 45k for now

- Management expects the scooter run-rate to reach 50K units in Q4FY14. If executed, it will help TVS garner some of its lost market share in the scooter segment

- 3W sales stood up by 53.5% YoY to 7,369 units with most of it coming from the overseas markets; 3W share to total sales forms 4.1% in February and 3.9% YTD, 120bp higher YoY. The company is expected to benefit from this as 3Ws fetch high margin

Our view: YTD growth remains flat at 1% YoY, largely supported by scooters and consistently improving export markets. With recent launches, TVS should see stable monthly run-rate. However, given the sharp recent rally in the stock price, the valuations are overbuilding recovery in volume growth and margin. We maintain our negative stance.

Source : Equity Bulls

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