TVS Motors
Competitive pressures continue; Sell
Key takeaways
Weak demand continues. During 3QFY14, TVS Motors’ sales of mopeds
were down 10.1% yoy. Motorcycles and scooters fared better, registering
1.7% and 9.4% yoy sales growth, respectively, on a lower base. The threewheeler segment displayed a strong growth trajectory, up 49.7% yoy. Threewheelers have been up consistently, while two wheelers continue to struggle.
3QFY14 results to be decent. On a lower base the previous year, 3QFY14
results are expected to be decent, with 10.2% yoy revenue growth (0.2%
volume growth yoy and 10% yoy realisation improvement), to `19.8bn. The
EBITDA margin is expected to be 5.9% (flat yoy and qoq). We expect 8.5%
yoy EBITDA growth. As we expect lower interest expense yoy, we anticipate
profit to grow 15.3% yoy, to `605m. Our profit margin expectation is 3%
(10bps higher yoy, 10bps lower qoq).
Per-unit parameters lower qoq. We expect EBITDA per vehicle to be 8.3%
higher yoy (lower 3.3% qoq), while the contribution per vehicle is expected to
be up 9.2% yoy (2.3% qoq). Profit per vehicle is expected to be 15.1% higher
yoy (lower 4.2% qoq).
Our take. Restrained domestic and overseas sales resulted in TVS Motors
reporting lower 1QFY14 results yoy. In 2Q, the performance was much
better, driven by higher realizations. While intense competition, subdued
domestic demand and lower overseas sales curtailed potential for yoy growth
in 1HFY14, demand recovery is likely in FY15. The 1QFY14 volume decline
was 4.7% (after a 7.5% yoy decline in FY13), while 2Q and 3Q growth at
4.3% yoy and 0.2% yoy respectively was also subdued. In view of the recent
run-up in the stock price, we downgrade to a Sell. Risks. Above-expected
demand and operating performance, possibility of a technology tie-up or
partnership with a foreign partner, which would lead to faster product
development and new product launches.
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Competitive pressures continue; Sell
Key takeaways
Weak demand continues. During 3QFY14, TVS Motors’ sales of mopeds
were down 10.1% yoy. Motorcycles and scooters fared better, registering
1.7% and 9.4% yoy sales growth, respectively, on a lower base. The threewheeler segment displayed a strong growth trajectory, up 49.7% yoy. Threewheelers have been up consistently, while two wheelers continue to struggle.
3QFY14 results to be decent. On a lower base the previous year, 3QFY14
results are expected to be decent, with 10.2% yoy revenue growth (0.2%
volume growth yoy and 10% yoy realisation improvement), to `19.8bn. The
EBITDA margin is expected to be 5.9% (flat yoy and qoq). We expect 8.5%
yoy EBITDA growth. As we expect lower interest expense yoy, we anticipate
profit to grow 15.3% yoy, to `605m. Our profit margin expectation is 3%
(10bps higher yoy, 10bps lower qoq).
Per-unit parameters lower qoq. We expect EBITDA per vehicle to be 8.3%
higher yoy (lower 3.3% qoq), while the contribution per vehicle is expected to
be up 9.2% yoy (2.3% qoq). Profit per vehicle is expected to be 15.1% higher
yoy (lower 4.2% qoq).
Our take. Restrained domestic and overseas sales resulted in TVS Motors
reporting lower 1QFY14 results yoy. In 2Q, the performance was much
better, driven by higher realizations. While intense competition, subdued
domestic demand and lower overseas sales curtailed potential for yoy growth
in 1HFY14, demand recovery is likely in FY15. The 1QFY14 volume decline
was 4.7% (after a 7.5% yoy decline in FY13), while 2Q and 3Q growth at
4.3% yoy and 0.2% yoy respectively was also subdued. In view of the recent
run-up in the stock price, we downgrade to a Sell. Risks. Above-expected
demand and operating performance, possibility of a technology tie-up or
partnership with a foreign partner, which would lead to faster product
development and new product launches.
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