TVS Motor Company (TVS IN) - Soft performance amid rich valuations - CSEC Research

Soft performance amid rich valuations

- In 4QFY17, TVS Motors reported revenue of INR 28.4bn (+1.7% YoY). Sales volumes grew by 2% YoY to 674,870 units, while realization remained flat YoY. Moped volumes de-grew 1% YoY while Motorcycle and scooter volumes grew by 10% YoY and 23% YoY, respectively. 3W volume dipped 9% YoY. The company has given discount of INR 570mn for helping the dealers to liquidate the stocks during end of FY17.

- For FY17, Overall volumes grew by 9%. Scooter, motorcycle and moped volumes grew by 7%, 6% and 23%, respectively. 3W volumes were down by 38% and exports de-grew by 7%.

- EBITDA margin declined by 140 bps YoY to 5.7% on account of higher RM cost (+7% YoY). PAT declined ~7% YoY to INR 1.2bn. The company has taken INR 200-300 price hike to counter the RM costs.).

Valuation: Currently the stock is trading at 30.8/21.9X FY18E/19E EPS, respectively, which is 34% and 27% premium to its peers Bajaj Auto and Hero Motor on FY19 EPS. Owing to its expensive valuation we assign SELL rating on the stock with a target price of INR 416, assigning a PE of 19X FY19E earnings. Risks: Rise in commodity prices and a slowdown in scooter sales growth.

Shares of TVS MOTOR COMPANY LTD. was last trading in BSE at Rs.515.9 as compared to the previous close of Rs. 499.25. The total number of shares traded during the day was 179931 in over 2835 trades.

The stock hit an intraday high of Rs. 517.9 and intraday low of 498.75. The net turnover during the day was Rs. 91882504.

Source : Equity Bulls

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