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UBS Investment Research
TVS Motor Company Ltd.
R eiterate Buy but lower price target [EXTRACT]
Strong volume growth in scooters and mopeds
TVS Motor (TVS) has reported 16% YoY volume growth for FY12 YTD, with
scooters and mopeds growing 25% and 20%, respectively. The motorcycle
segment registered lower YoY growth of 8%. Exports volumes were up 35% YoY.
We maintain our Buy rating on our strong volume growth expectations in the
scooter and moped segments that would lead to margin expansion.
Reduce estimates on removal of DEPB benefit
We remove the Duty Entitlement Pass Book (DEPB) benefit of Rs900m from
FY13 and lower our volume growth estimate in Indonesia, resulting in our
10%/19% lower EPS estimates for FY12/13, from Rs4.17/6.57 to Rs3.75/5.31. We
lower our price target from Rs80.00 to Rs70.00 on our lower earnings estimates.
Expect slower ramp-up in Indonesia
We reduce our volume growth estimates to 22%/50%/50% for FY11/12/13 from
35%/100%/75% on our expectation of slower ramp-up in Indonesia. The company
has sold 14,800 units in 9M FY11 compared with 15,000 units in FY10. We do not
expect TVS’s Indonesia operations to break even over our forecast period.
Valuation: remains compelling; reiterate Buy
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
13%, and an intermediate growth rate of 13%. At our price target, the stock’s
implied valuation would be 13x FY13E PE. We believe its valuation remains
attractive at 5.3x EV/EBITDA FY13E—a 40% discount to its peers.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
TVS Motor Company Ltd.
R eiterate Buy but lower price target [EXTRACT]
Strong volume growth in scooters and mopeds
TVS Motor (TVS) has reported 16% YoY volume growth for FY12 YTD, with
scooters and mopeds growing 25% and 20%, respectively. The motorcycle
segment registered lower YoY growth of 8%. Exports volumes were up 35% YoY.
We maintain our Buy rating on our strong volume growth expectations in the
scooter and moped segments that would lead to margin expansion.
Reduce estimates on removal of DEPB benefit
We remove the Duty Entitlement Pass Book (DEPB) benefit of Rs900m from
FY13 and lower our volume growth estimate in Indonesia, resulting in our
10%/19% lower EPS estimates for FY12/13, from Rs4.17/6.57 to Rs3.75/5.31. We
lower our price target from Rs80.00 to Rs70.00 on our lower earnings estimates.
Expect slower ramp-up in Indonesia
We reduce our volume growth estimates to 22%/50%/50% for FY11/12/13 from
35%/100%/75% on our expectation of slower ramp-up in Indonesia. The company
has sold 14,800 units in 9M FY11 compared with 15,000 units in FY10. We do not
expect TVS’s Indonesia operations to break even over our forecast period.
Valuation: remains compelling; reiterate Buy
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
13%, and an intermediate growth rate of 13%. At our price target, the stock’s
implied valuation would be 13x FY13E PE. We believe its valuation remains
attractive at 5.3x EV/EBITDA FY13E—a 40% discount to its peers.
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