TVS MOTORS : BUY TARGET PRICE: RS.54 :Kotak Sec PDF link

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http://www.kotaksecurities.com/pdf/dmb/MorningInsight25052012.pdf

TVS MOTORS (TVSM)
PRICE: RS.33 RECOMMENDATION: BUY
TARGET  PRICE: RS.54 FY13E P/E: 6.1X
 TVSM’s results came in lower than expectation on the operating margin
front, but lower tax provision led to inline net profit.
 Revenues in 4QFY12 remained flat YoY at Rs16,272mn. EBITDA margin
came in at 6.1% as against 5.9% in 4QFY11 and 6.5% in 3QFY12. Net
profit grew by 31% YoY to Rs572mn backed by other income and lower
tax provision.
 In FY12, the company's volumes grew by 7.3% to 2.2mn units. In FY13,
the company expects the 2W industry to grow by 10% and TVSM's volumes to surpass the industry growth rate.
 We however remain cautious given current slowdown and rising competition. We have modeled in a 5.3% volume growth for the company in
FY13. We expect the volumes to remain under pressure in the near term
and pick up over the medium term.
 Reasons for our positive outlook over the medium term includes 1.Expected pick-up in economic activity and 2.New launches planned by the
company. Further, growth in 2HFY13 will also be aided by lower 2HFY12
base.
 We are revising our estimates to factor in the current weak demand for
2W's. We have trimmed our revenues and net profit estimates for FY13
by 2.3% and 5% respectively.
 We are lowering our target price on the stock to Rs54 (earlier Rs63). We
have valued the stock at 10x its standalone FY13 expected EPS of Rs5.4.
Our target PE multiple for the stock is at ~30% discount to that assigned
to larger peers. We maintain our BUY rating on the stock.
 Losses in subsidiaries are driving the consolidated net profits lower and
that remains a major worry for the company.