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TVS MOTORS (TVSM)
PRICE: RS.66 RECOMMENDATION: BUY
TARGET PRICE: RS.75 FY13E P/E: 9.9X
q TVS Motors reported a strong set of results for 2QFY12. Robust volumes
and healthy operating performance helped the company clock 40% YoY
and 30% QoQ jump in net profits.
q Results remained ahead of our expectation on account of better than expected
sales realization and the same leading to healthy show on the operating
front.
q Company expects their volumes to grow by 15% in FY12 and expect the
industry volume growth to range between 12-15%. Management also expects
commodity prices to soften and that will be positive for the margins
going forward.
q We have revised our FY12 estimates upwards in view of better than expected
2QFY12 performance. We are also introducing FY13 estimates.
q We are rolling over our target price to FY13 expected earnings. We value
the stock at 11.2x (20% discount to PE multiple of 14x that we assigned
to Hero MotoCorp and Bajaj Auto). Our revised price target now stands
at Rs75 (earlier Rs70) and we continue with our BUY rating on the stock
Strong volumes drive revenues by 23% YoY
n TVSM's revenues in 2QFY12 increased by 23% YoY helped by strong performance
on the volume front. Volumes for the company in 2QFY12 grew by
15.1% YoY. During the same period, scooter volumes were up by 27% and motorcycle
segment reported a 15% growth. 2W export volumes registered a
healthy 31% growth.
n On account of various price hikes taken in the past one year, blended realization
improved by 6.4% YoY.
n On QoQ basis, revenues were up by 14% primarily helped by 13% uptick in volumes.
n Company is looking to launch a refresh of its existing product in the premium
motorcycle segment. Going further down, the company will be launching a new
motorcycle towards the end of 4QFY12 or start of 1QFY13.
n Management expects the industry to grow by 12-15% in FY12 and TVSM to register
15% higher volumes in FY12.
n In our assumptions, we have factored in a 13.5% volume growth for the company
in FY12 and 10.3% in FY13.
n We expect the company's revenues to grow by 21% in FY12 and 14% in FY13.
EBITDA margin shows improvement for second successive quarter
n TVS Motors performance on the operating front remained strong for second successive
quarter even though there was a YoY dip in EBITDA margin.
n EBITDA for the quarter grew by 19% YoY to Rs1,460mn during the quarter under
review. EBITDA margin though dropped from 7.6% in 2QFY11 to 7.3% in
2QFY12 on account of substantial rise in the commodity prices. However margins
were ahead of our expectation.
n Sequentially margins improved marginally from 7.2% to 7.3%. Sequential steep
jump in other expenses more or less off-setted the benefit from sequential reduction
in raw material cost for the company.
n Management expects the commodity prices to remain soft in the near term and
expect operating margins to receive some boost on this account.
PAT grows at a strong pace
n Company's PAT in 2QFY12 jumped by 40% YoY and 30% QoQ to Rs765mn.
Reported PAT was way ahead of our expectation of Rs629mn.
n Depreciation cost grew at a modest rate of 2.2% while amortization cost was
lower by 50% and more in line with that reported in 1QFY12. Similarly net interest
cost too remained similar to 1QFY11.
n EPS for the quarter stood at Rs1.6.
October volume update
n TVS Motors October 2011 volumes stood at 183,718 units, down by 6% over October
2010 volumes of 195,271 units.
n Company's plant during the month remained closed for 7 days as part of the
annual maintenance shutdown which we believe would have impacted dispatches
in October 2011.
n On the positive side, the company recorded their highest ever retail sales of
250,000 units (20% higher YoY) in the recent festive season. Strong retail sales
and weak wholesale volume led to significant liquidation of stock, both at the
company and the dealers end.
n Accordingly the company is expecting wholesale volumes in excess of 200,000
units per month in November 2011 and December 2011. Wholesale volumes for
November 2010 and December 2010 stood at 157,401 units and 171,859 units
respectively.
Other highlights
n During the quarter, PT TVS Motor Company Indonesia volumes stood at 7,837, a
YoY growth of 47%.
n During 2QFY12, the company invested Rs769.5mn in subsidiaries and related
companies. Investments in subsidiary (and other companies) have increased substantially
in the past few quarters which is a cause of concern.
Change in estimates
On account of better than expected results we are revising our FY12 estimates upward.
We are increasing our revenue estimate upward by 3.2% and our EBITDA
margin estimate from 6.2% to 6.8% leading 5.8% upward revision in PAT estimates.
We are introducing FY13 estimates where we have factored in a 10% volume
growth and assumed EBITDA margin similar to our FY12 estimates. We expect the
company net profit in FY13 to grow by 21.5%.
Valuation
n At the CMP of Rs66, the stock trades at 12x and 9.9x expected FY12 and FY13
earnings respectively.
n We are rolling over our target price to FY13 expected earnings.
n We value the stock at 11.2x (20% discount to PE multiple of 14x that we assigned
to Hero MotoCorp and Bajaj Auto).
n Our revised price target now stands at Rs75 (earlier Rs70) and we continue with
our BUY rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
TVS MOTORS (TVSM)
PRICE: RS.66 RECOMMENDATION: BUY
TARGET PRICE: RS.75 FY13E P/E: 9.9X
q TVS Motors reported a strong set of results for 2QFY12. Robust volumes
and healthy operating performance helped the company clock 40% YoY
and 30% QoQ jump in net profits.
q Results remained ahead of our expectation on account of better than expected
sales realization and the same leading to healthy show on the operating
front.
q Company expects their volumes to grow by 15% in FY12 and expect the
industry volume growth to range between 12-15%. Management also expects
commodity prices to soften and that will be positive for the margins
going forward.
q We have revised our FY12 estimates upwards in view of better than expected
2QFY12 performance. We are also introducing FY13 estimates.
q We are rolling over our target price to FY13 expected earnings. We value
the stock at 11.2x (20% discount to PE multiple of 14x that we assigned
to Hero MotoCorp and Bajaj Auto). Our revised price target now stands
at Rs75 (earlier Rs70) and we continue with our BUY rating on the stock
Strong volumes drive revenues by 23% YoY
n TVSM's revenues in 2QFY12 increased by 23% YoY helped by strong performance
on the volume front. Volumes for the company in 2QFY12 grew by
15.1% YoY. During the same period, scooter volumes were up by 27% and motorcycle
segment reported a 15% growth. 2W export volumes registered a
healthy 31% growth.
n On account of various price hikes taken in the past one year, blended realization
improved by 6.4% YoY.
n On QoQ basis, revenues were up by 14% primarily helped by 13% uptick in volumes.
n Company is looking to launch a refresh of its existing product in the premium
motorcycle segment. Going further down, the company will be launching a new
motorcycle towards the end of 4QFY12 or start of 1QFY13.
n Management expects the industry to grow by 12-15% in FY12 and TVSM to register
15% higher volumes in FY12.
n In our assumptions, we have factored in a 13.5% volume growth for the company
in FY12 and 10.3% in FY13.
n We expect the company's revenues to grow by 21% in FY12 and 14% in FY13.
EBITDA margin shows improvement for second successive quarter
n TVS Motors performance on the operating front remained strong for second successive
quarter even though there was a YoY dip in EBITDA margin.
n EBITDA for the quarter grew by 19% YoY to Rs1,460mn during the quarter under
review. EBITDA margin though dropped from 7.6% in 2QFY11 to 7.3% in
2QFY12 on account of substantial rise in the commodity prices. However margins
were ahead of our expectation.
n Sequentially margins improved marginally from 7.2% to 7.3%. Sequential steep
jump in other expenses more or less off-setted the benefit from sequential reduction
in raw material cost for the company.
n Management expects the commodity prices to remain soft in the near term and
expect operating margins to receive some boost on this account.
PAT grows at a strong pace
n Company's PAT in 2QFY12 jumped by 40% YoY and 30% QoQ to Rs765mn.
Reported PAT was way ahead of our expectation of Rs629mn.
n Depreciation cost grew at a modest rate of 2.2% while amortization cost was
lower by 50% and more in line with that reported in 1QFY12. Similarly net interest
cost too remained similar to 1QFY11.
n EPS for the quarter stood at Rs1.6.
October volume update
n TVS Motors October 2011 volumes stood at 183,718 units, down by 6% over October
2010 volumes of 195,271 units.
n Company's plant during the month remained closed for 7 days as part of the
annual maintenance shutdown which we believe would have impacted dispatches
in October 2011.
n On the positive side, the company recorded their highest ever retail sales of
250,000 units (20% higher YoY) in the recent festive season. Strong retail sales
and weak wholesale volume led to significant liquidation of stock, both at the
company and the dealers end.
n Accordingly the company is expecting wholesale volumes in excess of 200,000
units per month in November 2011 and December 2011. Wholesale volumes for
November 2010 and December 2010 stood at 157,401 units and 171,859 units
respectively.
Other highlights
n During the quarter, PT TVS Motor Company Indonesia volumes stood at 7,837, a
YoY growth of 47%.
n During 2QFY12, the company invested Rs769.5mn in subsidiaries and related
companies. Investments in subsidiary (and other companies) have increased substantially
in the past few quarters which is a cause of concern.
Change in estimates
On account of better than expected results we are revising our FY12 estimates upward.
We are increasing our revenue estimate upward by 3.2% and our EBITDA
margin estimate from 6.2% to 6.8% leading 5.8% upward revision in PAT estimates.
We are introducing FY13 estimates where we have factored in a 10% volume
growth and assumed EBITDA margin similar to our FY12 estimates. We expect the
company net profit in FY13 to grow by 21.5%.
Valuation
n At the CMP of Rs66, the stock trades at 12x and 9.9x expected FY12 and FY13
earnings respectively.
n We are rolling over our target price to FY13 expected earnings.
n We value the stock at 11.2x (20% discount to PE multiple of 14x that we assigned
to Hero MotoCorp and Bajaj Auto).
n Our revised price target now stands at Rs75 (earlier Rs70) and we continue with
our BUY rating on the stock.
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