29 April 2014
4QFY14 Results Update | Sector:
TVS Motor Company
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Superior margin performance, outlook remains strong
TVS Motor’s (TVSL) 4QFY14 results were above estimate, with EBITDA margin at 6.4%
(v/s est. of 5.3%), resulting in Adj. PAT growth of 41% YoY to INR822m. Margins
(adjusted for one-time excise duty cut impact) stood at 6.9% (v/s 5.4% in 4QFY13).
Earnings call highlights:
a) TVSL to outperform industry growth of 8-10% for FY15, led
by new launches, b)
continues strong performance; hikes scooter capacity from
25,000 to 45,000/m, c) plans to launch all-new
Star City plus
(110cc motorcycle) and
(110cc variant) during 1QFY15, d)
(110cc motorcycle) to be re-
launched during 2HFY15, e) BMW tie-up on track, with first product launch during
2HCY15, f) FY14 investments: INR500m in Indonesia and INR750m in TVS Credit
Services (finance arm), g) capex guidance of INR2.5b for FY15 (flat YoY), h) Expects
losses in Indonesia to continue with cash break-even at 6,000 units/m (EBITDA loss of
USD9m in FY14), i) declares second interim dividend of INR0.75/share, amounting to
total dividend of INR1.4/share (v/s INR1.2/share in FY13).
Financials & Valuation (INR Million)
2014 2015E 2016E
79,619 95,675 109,657
Upgrade FY15E/16E EPS by 7.3%/5%; maintain Buy
We upgrade FY15E/16E EPS by 7.3%/5% on superior margin performance, partially
offset by higher depreciation charges on increased capex guidance.
TVSL is well positioned to benefit from the scooterization wave with its complete
scooter portfolio. Over the next 12-18 months, it plans to launch multiple products
across segments to reinforce and fill gaps in the portfolio.
Expect EPS CAGR of 38% with return ratios (RoE) improving from 19.8% in FY14 to
26.4% in FY16E. We expect TVSL to be net cash by FY16E driven by strong FCF.
Stock trades at 10.9x/8.8x FY15E/16E EPS of INR8.4/10.5 respectively. Maintain
with a target price of INR126 (12x FY16E EPS).
(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.