TVS Motor Company
BSE SENSEX
32,597
S&P CNX
10,044
6 December 2017
Update | Sector: Automobiles
CMP: INR734
TP: INR764 (+4%)
Neutral
Apache RR310: First BMW partnership product launched
Launch price of INR205k at over 40% premium to Bajaj Dominar/RE Classic
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
TVSL IN
475
747/346
9/31/83
350.3
5.4
658.0
42.6
Financials Snapshot (INR b)
2018E 2019E 2020E
Y/E Mar
149.8 186.6 223.7
Net Sales
11.6
18.9
24.7
EBITDA
7.1
12.3
16.6
PAT
14.9
25.8
34.9
EPS (INR)
27.0
73.1
35.0
Gr. (%)
62.0
83.0 111.9
BV/Sh (INR)
26.5
35.6
35.8
RoE (%)
26.8
38.7
42.4
RoCE (%)
49.2
28.4
21.1
P/E (x)
11.8
8.8
6.6
P/BV (x)
”
TVS Apache RR 310 is another step
in our effort to deliver beyond
customers’ expectations and
offering them a chance to
upgrade from premium to
super-premium category. TVS
Apache RR 310 is a testimony to
our Racing DNA and R&D
capabilities, positioned to fulfill
the ever-growing aspirations of
the new age customers
globally.”
-
Mr. KN Radhakrishnan, President
& Chief Executive Officer, TVS
Motor Company
TVS Motor (TVSL), on 6
th
December 2017, launched Apache RR 310, the first
product from its partnership with BMW. This marks its foray in the super-
premium category, both in the domestic and international markets.
The motorcycle is priced at ~INR205k (ex-showroom), implying a premium of
over 40% to Bajaj Dominar.
Average volumes for 250-500cc segment are ~66.5k/month including Royal
Enfield and ~2.7k/month excluding Royal Enfield.
It is the first motorcycle rolled out under the TVS badge, as part of TVSL’s
partnership with BMW Motorrad, co-developed alongside BMW G310R.
Apache RR 310 uses the same liquid-cooled, 312cc single-cylinder engine as
BMW G310R.
It offers an attractive alternative to the entry-level performance motorcycles,
and will compete with a wide range of motorcycles, including the KTM RC 390,
Mahindra Mojo, Bajaj Dominar and Royal Enfield.
It was designed to be a motorcycle that can cater to daily usage as well as
weekend riding or track days. TVSL further believes that the bike will take the
position of the company to a new level.
Both anti-lock braking system (ABS) and electronic fuel injection (EFI) system,
will be available as standard in TVS Apache RR 310.
TVSL expects to sell 10,000 Apache RR310 bikes worldwide in the first year (v/s
our estimate of ~15k in FY19).
Deliveries will commence by end-December. Bookings are expected to start
soon (no timeline has been confirmed by TVS yet).
BMW Motorrad tie-up provides additional revenue stream, technological edge
BMW G310R and GS exports have clocked average monthly volumes of ~1.9k in
YTD FY18. Management has guided for 2-2.5k units per month in FY18 (v/s our
estimate of 2.25k/month in FY18 and 6.25k/month in FY19).
Launch of these models in India is slated for 2HFY19. We believe this would not
be a threat for Apache RR310 volumes due to the significant price differential,
as globally BMW G310R is priced at USD4,750 (~INR306k).
This tie-up would give TVSL an additional revenue stream in the form of
contract manufacturing for BMW Motorrad.
Valuation view:
We have been positive on TVSL since our coverage initiation in
Nov’13. We also like continued improvement in its competitive positioning and
financial performance. Our EPS estimates are one of the highest on the street
(~18/~29% higher than Bloomberg consensus for FY19/20). However, valuations at
28.4x/21.1x FY19E/FY20E EPS already reflect large part of the earnings drivers,
leaving no margin of safety for execution risk. Our TP is INR764 (~20x Mar-20E EPS
+ INR67/share for value in NBFC investment post 20% HoldCo discount).
Jinesh Gandhi – Research Analyst
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Suneeta Kamath – Research Analyst
(suneeta.kamath@MotilalOswal.com) |
Deep Shah – Research Analyst
(deep.shah@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.

TVS Motor Company
Exhibit 1: Apache RR310 Racing Red
Exhibit 2: BMW G310R which is exported by TVS
Source: MOSL, Company
Source: MOSL, Company
Exhibit 3: Apache RR 310 is priced at substantial premium to key competitors
Comparison
TVS Apache RR310
KTM RC 390
KTM Duke 390
Bajaj Dominar 400
BMW G310R*
Mahindra Mojo
Royal Enfield Classic 350
Royal Enfield Classic 350
Royal Enfield Himalayan
Ex-showroom price (INR ‘000)
205
235
236
142
306
175
136
176
166
Displacement
312cc
373cc
373cc
373cc
313cc
295cc
346cc
499cc
411cc
*USD 4,750;
Source: MOSL
Exhibit 4: Our assumptions for volumes under BMW tie-up
FY17
FY18E
100,000
75,000
FY19E
FY20E
Exhibit 5: BMW G310R and GS monthly volumes
BMW monthly exports
2,276
1,342
1,576
1,717
2,045
2,084
2,232
26,956
4,700
BMW exports
4,000
15,000
21,000
Apache RR310
Source: MOSL, Company
Source: MOSL, Company
6 December 2017
2

TVS Motor Company
Exhibit 6: Expect 18% volume CAGR over FY17-20E
Volumes (units)
22.4
2.2
-7.5
5.4
9.3
Growth (%)
20.3
18.7
26.1
14.9
12.7
10.6
Exhibit 7: Strong
23%
revenue CAGR over FY17-20E
Net sales (INR m)
Growth (%)
23.4
24.6
19.9
9.3
FY13
FY14
FY15
FY16
FY17
FY18E FY19E FY20E
Source: Company, MOSL
FY14
FY15
FY16
FY17
FY18E
FY19E
FY20E
Source: Company, MOSL
Exhibit 8: Operating leverage and product mix to drive
margins
EBITDA (INR m)
EBITDA margin (%)
10.1
6.0
6.0
7.3
7.1
7.8
11.1
Exhibit 9: Superior operating performance to drive earnings
PAT (INR m)
Growth (%)
73.1
44.0
33.4
40.7
27.0
14.1
35.0
FY14
FY15
FY16
FY17
FY18E
FY19E
FY20E
FY14
FY15
FY16
FY17
FY18E
FY19E
FY20E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 10: FCF to remain strong despite high capex plans
CFO (INR m)
Capex (INR m)
FCF (INR m)
Exhibit 11: Sharp improvement in return ratios
RoCE (%)
RoE (%)
35.6
27.2
19.7
22.7
25.6
26.5
38.7
21.9
24.7
22.8
26.8
42.4
35.8
20.3
FY14
FY15
FY16
FY17
FY18E
FY19E
FY20E
FY14
FY15
FY16
FY17
FY18E
FY19E
FY20E
Source: Company, MOSL
Source: Company, MOSL
6 December 2017
3

TVS Motor Company
Exhibit 12: Snapshot of Revenue model
units
Motorcycle
Growth (%)
% of total vols
Scooter
Growth (%)
% of total vols
Moped
Growth (%)
% of total vols
Total 2Ws
Growth (%)
% of total vols
3Ws
Growth (%)
% of total vols
Domestic
Growth (%)
% of total vols
Exports
Growth (%)
% of total vols
Total volumes
Growth (%)
ASP (INR/unit)
Growth (%)
Net Sales (INR m)
Growth (%)
FY12
843,114
0.8
38.4
529,095
17.1
24.1
785,938
11.8
35.8
2,158,147
8.3
98.2
39,792
-0.2
1.8
1,910,226
6.9
86.9
287,713
17.6
13.1
2,197,939
8.2
32,492
5.0
71,415
13.6
FY13
749,429
-11.1
36.9
441,622
-16.5
21.7
791,999
0.8
39.0
1,983,050
-8.1
97.6
49,190
23.6
2.4
1,787,007
-6.5
87.9
245,233
-14.8
12.1
2,032,240
-7.5
34,765
7.0
70,650
-1.1
FY14
790,463
5.5
38.1
475,615
7.7
22.9
730,108
-7.8
35.2
1,996,186
0.7
96.1
80,842
64.3
3.9
1,762,009
-1.4
84.8
315,019
28.5
15.2
2,077,028
2.2
38,333
10.3
79,619
12.7
FY15
957,114
21.1
37.7
706,298
48.5
27.8
765,496
4.8
30.1
2,428,908
21.7
95.6
112,891
39.6
4.4
2,122,966
20.5
83.5
418,833
33.0
16.5
2,541,799
22.4
39,509
3.1
100,423
26.1
FY16
1,016,807
6.2
38.0
812,527
15.0
30.3
738,547
-3.5
27.6
2,567,881
5.7
95.9
110,821
-1.8
4.1
2,224,902
4.8
83.1
453,800
8.3
16.9
2,678,702
5.4
41,455
4.9
111,047
10.6
FY17
1,072,503
5.5
36.6
870,863
7.2
29.7
910,519
23.3
31.1
2,858,585
11.3
97.6
69,254
-37.5
2.4
2,502,050
12.5
85.5
425,789
-6.2
14.5
2,927,839
9.3
41,448
0.0
121,353
9.3
FY18E
1,345,018
25.4
38.2
1,182,462
35.8
33.6
873,915
-4.0
24.8
3,428,351
19.9
97.3
95,158
37.4
2.7
2,932,243
17.2
83.2
591,266
38.9
16.8
3,523,509
20.3
42,507
2.6
149,773
23.4
FY19E
1,633,586
21.5
39.1
1,463,473
23.8
35.0
897,602
2.7
21.5
4,069,662
18.7
97.3
112,594
18.3
2.7
3,430,819
17.0
82.0
751,436
27.1
18.0
4,182,255
18.7
44,620
5.0
186,614
24.6
FY20E
1,936,258
18.5
40.3
1,714,045
17.1
35.7
922,157
2.7
19.2
4,672,460
14.8
97.2
133,357
18.4
2.8
3,894,939
13.5
81.0
910,878
21.2
19.0
4,805,817
14.9
46,548
4.3
223,701
19.9
Source: Company, MOSL
6 December 2017
4

TVS Motor Company
Financials and Valuations
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2013
70,650
-1.1
4,090
5.8
1,304
2,786
480
246
-916
1,636
476
29.1
0
1,160
1,810
-27.3
2014
79,619
12.7
4,781
6.0
1,317
3,465
254
302
13
3,525
909
25.8
0
2,616
2,607
44.0
2015
100,423
26.1
6,066
6.0
1,533
4,533
274
303
0
4,562
1,083
23.7
0
3,478
3,478
33.4
2016
111,047
10.6
8,099
7.3
2,361
5,738
487
1,039
0
6,289
1,397
22.2
0
4,893
4,893
40.7
2017
121,353
9.3
8,571
7.1
2,878
5,693
440
1,734
0
6,987
1,406
20.1
0
5,581
5,581
14.1
2018E
149,773
23.4
11,607
7.8
3,305
8,302
450
1,994
0
9,845
2,757
28.0
0
7,089
7,089
27.0
2019E
186,614
24.6
18,923
10.1
3,780
15,143
(INR Million)
2020E
223,701
19.9
24,719
11.1
4,248
20,471
408
2,193
0
16,928
4,655
27.5
0
12,273
12,273
73.1
302
2,522
0
22,691
6,127
27.0
0
16,565
16,565
35.0
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2013
475
11,772
12,247
6,345
931
19,523
22,479
12,365
10,115
361
8,688
12,029
5,097
3,005
175
3,752
11,670
11,136
534
359
19,523
2014
475
13,678
14,153
4,424
1,247
19,824
24,723
13,466
11,257
481
8,959
14,950
5,482
3,341
826
5,302
15,823
14,612
1,211
-873
19,824
2015
475
15,979
16,454
9,187
1,528
27,169
28,218
14,922
13,296
894
10,125
21,732
8,197
5,039
54
8,443
18,878
17,390
1,488
2,854
27,169
2016
475
19,108
19,583
9,741
1,437
30,762
34,651
17,456
17,196
310
12,703
19,314
6,964
5,780
327
6,243
18,760
15,437
3,323
554
30,762
2017
475
23,608
24,083
11,648
1,257
36,988
39,290
19,451
19,839
623
15,880
22,705
9,670
7,238
85
5,713
22,059
18,594
3,465
646
36,988
2018E
475
28,984
29,459
11,648
1,257
42,363
45,463
22,757
22,706
450
15,880
29,771
11,934
8,933
1,938
6,966
26,444
22,979
3,465
3,327
42,363
2019E
475
38,972
39,447
9,148
1,257
49,852
51,463
26,537
24,926
450
17,380
39,192
14,870
11,130
5,634
7,558
32,096
28,631
3,465
7,095
49,852
(INR Million)
2020E
475
52,681
53,156
6,648
1,257
61,061
57,462
30,785
26,677
451
18,880
52,839
17,825
13,342
12,692
8,981
37,786
34,321
3,465
15,053
61,061
6 December 2017
5

TVS Motor Company
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Fixed Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2013
3.8
6.6
25.8
1.2
56.5
2014
5.5
8.3
29.8
1.4
29.6
2015
7.3
10.5
34.6
2.0
34.0
2016
10.3
15.3
41.2
2.5
28.9
68.8
17.2
3.1
42.8
0.4
15.1
15.7
14.7
3.1
14
26
58
0.5
19.7
20.3
23.0
3.2
14
25
67
0.3
22.7
21.9
24.0
3.6
17
30
63
0.6
27.2
24.7
23.5
3.2
17
23
51
0.5
2017
11.7
17.8
50.7
2.5
25.6
60.4
14.0
2.9
40.7
0.4
25.6
22.8
21.7
3.1
20
29
56
0.5
2018E
14.9
21.9
62.0
3.0
24.2
47.5
11.4
2.3
29.9
0.4
26.5
26.8
24.8
3.3
20
29
56
0.3
2019E
25.8
33.8
83.0
4.0
18.6
27.4
8.5
1.8
18.0
0.6
35.6
38.7
41.6
3.6
20
29
56
0.1
2020E
34.9
43.8
111.9
5.0
17.2
20.3
6.3
1.5
13.4
0.7
35.8
42.4
52.3
3.9
20
29
56
-0.1
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2013
4,090
-1,060
800
-527
878
4,181
-767
3,414
-295
77
-985
0
-276
-517
-2,358
-3,152
45
130
175
2014
4,781
24
1,613
-1,234
54
5,238
-2,580
2,658
-276
257
-2,598
0
-1,069
-230
-690
-1,988
651
175
826
2015
6,066
84
-3,853
-1,407
-44
846
-3,669
-2,823
-1,163
-101
-4,933
0
4,429
-285
-836
3,308
-778
832
54
2016
8,099
643
10,869
-1,458
745
18,898
-4,887
14,011
-1,712
502
-6,097
0
-461
-461
-2,139
-3,061
9,740
1,588
11,329
2017
8,571
1,734
8,529
-1,290
-1,261
16,283
-6,123
10,160
-1,942
583
-7,481
-1,676
2,792
-433
-1,411
-727
8,074
1,320
9,394
2018E
11,607
1,994
-828
-2,757
-1,994
8,023
-6,000
2,023
0
1,994
-4,006
0
0
-450
-1,713
-2,164
1,853
2,288
4,142
2019E
18,923
2,193
-73
-4,655
-2,193
14,195
-6,000
8,195
-1,500
2,193
-5,307
0
-2,500
-408
-2,284
-5,192
3,695
4,142
7,837
(INR Million)
2020E
24,719
2,522
-899
-6,127
-2,522
17,693
-6,000
11,693
-1,500
2,522
-4,978
0
-2,500
-302
-2,855
-5,657
7,058
7,837
14,895
6 December 2017
6

TVS Motor Company
NOTES
6 December 2017
7

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock
broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed
public company, the details in respect of which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock
Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Metropolitan Stock Exchange Of India Ltd. (MSE) for its stock broking activities & is Depository participant with Central Depository Services Limited
(CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
Pending Regulatory Enquiries against Motilal Oswal Securities Limited by SEBI:
SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold
inquiry and adjudge violation of SEBI Regulations; MOSL requested SEBI to provide all documents, records, investigation report relied upon by SEBI which were referred in Show Cause Notice. The matter is currently
pending.
MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have beneficial ownership of 1% or more securities in
the subject company at the end of the month immediately preceding the date of publication of the Research Report.
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a)
from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and
earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other
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TVS Motor Company
Disclosure of Interest Statement
Analyst ownership of the stock
TVS Motor Company
No
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