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TVS Motor — Positive trends in Indonesia
Country Overview
Raise PO, upgrade to Neutral
Following 13% YTD stock underperformance we upgrade TVS Motor to Neutral
from Underperform and raise our PO by 5% to Rs61. This is driven by similar
revision to our standalone estimates, and increased confidence over Indonesian
operations (lower losses, reduced funding by parent). We however continue to
prefer Hero Honda (HRHDF; C-1-7; Rs1808.10) in the two wheeler space.
Indonesia losses likely to be lower
Contrary to our estimates of a flattish demand, 1Q sales grew 22% YoY to around
7,000 units, due to new motorcycle Tormax 150, as well as increased acceptance
of models Neo and RockZ through increased dealer penetration. The company
will enter the scooter market in CY12E. We therefore raise volume assumptions
by ~40%/year to 32k units and 41k units over FY12/13E respectively. As a result,
we expect the Indonesian subsidiary to cut losses at a faster pace (see Table 1).
Standalone estimates tweaked
We raise our EPS forecasts by 5%/year over FY12-13E, driven by (1) slight
increase in segmental growth assumptions, mainly mopeds and scooters, on
easing of capacity constraints, and (2) lowering financial expenses by 2-4%/year,
on lowered funding requirements in the Indonesian subsidiary.
Why not a Buy?
Key issues to still remain an overhang, namely (1) sustainability of Indonesian
turnaround, (2) product lacuna in domestic bikes (c.75% of two wheelers), which
will likely be addressed through new products in CY12E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
TVS Motor — Positive trends in Indonesia
Country Overview
Raise PO, upgrade to Neutral
Following 13% YTD stock underperformance we upgrade TVS Motor to Neutral
from Underperform and raise our PO by 5% to Rs61. This is driven by similar
revision to our standalone estimates, and increased confidence over Indonesian
operations (lower losses, reduced funding by parent). We however continue to
prefer Hero Honda (HRHDF; C-1-7; Rs1808.10) in the two wheeler space.
Indonesia losses likely to be lower
Contrary to our estimates of a flattish demand, 1Q sales grew 22% YoY to around
7,000 units, due to new motorcycle Tormax 150, as well as increased acceptance
of models Neo and RockZ through increased dealer penetration. The company
will enter the scooter market in CY12E. We therefore raise volume assumptions
by ~40%/year to 32k units and 41k units over FY12/13E respectively. As a result,
we expect the Indonesian subsidiary to cut losses at a faster pace (see Table 1).
Standalone estimates tweaked
We raise our EPS forecasts by 5%/year over FY12-13E, driven by (1) slight
increase in segmental growth assumptions, mainly mopeds and scooters, on
easing of capacity constraints, and (2) lowering financial expenses by 2-4%/year,
on lowered funding requirements in the Indonesian subsidiary.
Why not a Buy?
Key issues to still remain an overhang, namely (1) sustainability of Indonesian
turnaround, (2) product lacuna in domestic bikes (c.75% of two wheelers), which
will likely be addressed through new products in CY12E.
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