Views on TVS Srichakra Ltd 2QFY2016 Results: Angel Broking

Views of Mr. Milan Desai (Research Analyst - Mid Caps, Angel Broking) on TVS Srichakra Ltd 2QFY2016 results:

TVS Srichakra numbers in-line with estimates:

For 2QFY2016, TVS Srichakra reported a good set of numbers. The top-line grew by 6.5% YoY to Rs. 522cr, against our estimate of INR 532cr. This is a positive considering that it is a major 2W tyre manufacturer and the 2W sales have been lackluster in the current financial year. The EBITDA margin has expanded by 539bp YoY to 15.7% mainly due to 997bp YoY decline in raw material cost (owing to rubber prices declining by ~6% on QoQ basis). We had built in EBITDA margin estimate of 16.1%. The company has reduced the debt significantly (from INR176cr to INR 37cr and is now net debt free) in 1HFY2016 and as a result its interest expense has declined by 57.0% YoY to INR 4cr. Owing to better operational performance and lower interest outgo the net profit nearly doubled to INR 49cr from INR 36cr in the same quarter of the previous year (against our estimate of INR 50cr).

TVS Srichakra has been a clear cut out performer in the Tyre industry as the 2W replacement market seems to be unaffected by the cheaper Chinese imports. The company has been increasing its share in the aftermarket segment which has enabled it to post strong growth and improve its margins. We remain bullish on the Stock as it has a leadership position in the OEM segment, which will perform well once the 2W sales improve. We maintain our BUY recommendation on the stock.

Shares of TVS SRICHAKRA LTD. was last trading in BSE at Rs.2815 as compared to the previous close of Rs. 2790.5. The total number of shares traded during the day was 2151 in over 344 trades.

The stock hit an intraday high of Rs. 2825 and intraday low of 2751. The net turnover during the day was Rs. 6010201.

Source : Equity Bulls

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