TVS MOTORS FY16
TVSL’s FY16 annual report highlights its industry-leading revenue
growth of 12.0% and PBT growth of 32.8%, led by standalone
operations. However, Indonesian subsidiaries remained a drag (loss of
INR0.7b). Although improving YoY, EBIDTA margins at 6.6% remained
much lower than the peer range of 15%-21%, primarily on account of
lower gross margins (at 29.9% v/s peer range of 32-33%) and higher
advertising spends (at ~6.3% of revenue v/s peer range of 1.9-2.5%). FCF
normalized to INR3.3b (FY15: -INR3.1b) due to a decrease in loans and
advances by INR1.5b and an improvement in the cash conversion cycle
to -10 days, partially offset by higher capex of INR4.6b (FY15: INR3.4b).
Over the last five years, 57% of cash generated have been utilized for
capex, while fixed asset turnover remained low at 6x. Investments in
non-core assets (investments and cash) stood at INR7.0b, 48% of NW
generated a yield of 6.7%; they primarily comprised of INR5.5b invested
in preference shares of TVS Motor Services (unrelated party). Low asset
turns and margins have dragged RoCE, which has remained muted at
16.8%. Debt stood at INR10.9b with average borrowing cost of 9.4%.
The
ART
of annual report analysis
Industry leading revenue growth
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27 July 2016
at 12% v/s 4-5% for peers.
Lower gross margins and higher
adv. spends leads to lower
EBITDA margins v/s peers.
Non-core assets at INR7b (48%
of NW), yields 6.7% returns while debt at
INR10.9b has adj. cost of 9.4%.
Stock Info
Growth stronger than peers:
In FY16, TVSL reported industry-
leading revenue growth of 12% (to INR115.2b) and PBT growth
of 32.8% (to INR5.1b) on the back of superior volume growth of
6.3% led by the standalone entity. Losses of subsidiaries
increased to INR460m (FY15: INR -155m), mainly due to higher
loss in the Indonesian subsidiary of INR716m (FY15: INR392m).
Sustained low margins:
EBIDTA margins improved marginally to
6.6% (FY15: 5.9%) on the back of benign commodity prices, but
are relatively lower than peers, primarily on account of (a)
lower gross margins at 30% v/s peer range of 29.9-33.6% (owing
to lower revenue mix from premium segments), and (b) higher
advertising, publicity and marketing expenditure at 6.3% of
revenue v/s peer range of 1.9-2.5%.
Working capital changes cushion cash flows:
FCF normalized to
INR3.3b (FY15: -INR3.1b), primarily due to a decline in the cash
conversion cycle to -10 days, mainly led by a fall in inventory to
46 days and a decline in loans and advances by INR1.5b. This
was partly compensated by an increase in capex to INR4.6b.
Capex forms major chunk of cash utilization, but FA turnover
low:
Over the last five years, ~57% of funds generated have
been utilized for capex. However, fixed asset turnover remained
low at 6x (~half of peers).
Non-core assets rise, remain a drag on RoCE:
Investments in
non-core assets stood at 48% of NW, with INR5.5b invested in
preference shares of TVS Motor Services (unrelated party; is the
holding company of the financing arm of TVSL). Investment
yield increased to ~6.7% (FY15: 4.0%). Debt stood at INR10.9b
(FY15: INR11.2b). Average borrowing cost adjusted for
concessional loans stood at 9.4%
. Low asset turns and margins
have dragged RoCE, which remained muted at 16.8%.
Bloomberg
CMP (INR)
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
M.Cap. (INR b) / M.Cap. (USD b)
TVSL IN
288
447.5
341/ 201
-9/-16/17
136.7/2.0
Financial summary (INR b)
Y/E Mar
Sales
EBITDA
Adj. PAT
EPS (INR)
EPS Gr. (%)
BV/Sh (INR)
P/E (x)
P/BV (x)
EV/EBITDA (x)
2016
112.4
7.5
4.3
9.1
24.2
40.8
31.6
7.1
19.2
2017E
129.9
9.7
5.8
12.3
34.8
49.7
23.5
5.8
14.2
2018E
147.0
12.2
7.6
16.1
31.2
62.2
17.9
4.6
11.0
E: MOSL Estimates
Auditor’s name
V. Sankar Aiyar & Co
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