30 January 2014
3QFY14 Results Update | Sector:
TVS Motor Company
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Strong quarter, scooter demand robust, multiple launches to support growth
TVS Motor’s (TVSL) 3QFY14 results were above estimate. Net sales grew by 14.4% YoY
(+3.5% QoQ) to INR20.6b (est. INR19.7b). EBITDA margin improved by 10bp QoQ to
6% (+10bp YoY). Interest cost continued on the downward trend, with 55% YoY
decline. EBITDA growth of 16% coupled with reduction in interest rate drove 31% YoY
growth in PAT to INR688m (est. INR651m).
scooter robust across markets, b)
expect scooter volumes at 50,000 units/m by Mar-14 v/s ~41,000 in 3Q. TVS is scaling
up scooter production capacity to 75,000/m, c) TVS will showcase a new motorcycle
and scooter in the Auto Expo (Feb-2014), d) it expects Indonesia FY14 volumes to
improve with the recent launch of
(Skubek), e) management guides
standalone business to be debt free in FY15 and f) the tie-up with BMW is on track and
expects to launch the first product in 2HFY15.
Valuation and view
TVSL is well positioned to benefit from the scooterization wave with its complete
scooter portfolio. Over the next 12-18 months, company plans to launch multiple
products across segments to reinforce and fill gaps in the portfolio.
Expect earnings CAGR of 34%, FCF of 25% over FY14E-16E, with return ratios (RoE)
improving from 19.9% in FY14E to 25.5% in FY16E. We expect TVSL to be net cash
by FY16E, driven by strong FCF.
We upgrade the FY14E/15E/16E EPS by ~4.1%/5.9%/5.9% driven by higher
realizations in 3Q performance. The stock trades at 12.8x/8.9x/7.1x
FY14E/15E/16E EPS of INR5.5/7.9/10 respectively. Maintain
with a target price
of INR100 (10x FY16E EPS).
Financials & Valuation (INR Million)
2014E 2015E 2016E
80,007 96,330 110,661
(Jinesh@MotilalOswal.com); +91 22 3982 5416
(Chirag.Jain@MotilalOswal.com); +91 22 3982 5418
Investors are advised to refer through disclosures made at the end of the Research Report.