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Motilal Oswal
TVS Motor
CMP: ₹289.85
Target: ₹339
TVS Motor is the third largest two-wheeler manufacturer in India, with a revenue of ₹10,131 crore (2014-15). The company has annual production capacity of 32 lakh two wheelers and 1.2 lakh three wheelers.
TVS Group spans across industries such as automobile, aviation, education, electronics, energy, finance, housing, insurance, investment, logistics, service and textiles.
Improved product mix drives realisation: Volume grew 9.5 per cent y-o-y (-6 per cent q-o-q) to 6.6 lakh units, with exports down about 6 per cent y-o-y. Realisation improved by about 2 per cent q-o-q (+4.6 per cent y-o-y) to about ₹42,600 (vs. our estimate of about ₹42,900), driven by a better product mix. Net sales grew by about 14.6 per cent y-o-y (-4.2 per cent q-o-q) to ₹2,810 crore (vs. our estimate of about ₹2,840 crore).
Valuation and view: We have lowered our estimates for FY17/18 by 5 per cent after factoring in weak exports. We see three key catalysts over the next three quarters, viz., a) Ramp-up of Victor from 1QFY16; b) Benefits of normal monsoon expected in 2QFY17 (about 40 per cent of volume contributed by rural markets); and c) Launch of BMW Alliance product in 2HFY17.
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