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TVS Srichakra (TVSSL) reported a mixed set of numbers for 2QFY2012. The
company’s net sales witnessed robust growth of 31.3% yoy to `354cr, which
resulted in a 109bp yoy increase in the company’s OPM to 9.3%. However, PAT
increased only by 11.1% yoy to `11cr, mainly due to high interest cost as loans
have increased substantially to `385cr for 1HFY2012. We expect the company to
report profit of `48cr and `71cr for FY2012E and FY2013E, respectively. We
maintain our Buy recommendation on the stock.
Expansion at Madurai plant and better performance of two-wheeler sales to drive
volume: TVSSL increased its capacity substantially in FY2010 at its Pantnagar
plant to meet the growing demand for tyres. Consequently, in 1HFY2012, the
company’s debt increased to `385cr because of the expansion plan carried out at
the Madurai plant to increase its SKUs (Stock Keeping Units). Also, the major
segment, the two-wheeler segment, to which the company caters, has witnessed
growth of 15% YTD and is expected to witness a 13% CAGR over FY2011-13E.
These factors will lead to an 11% CAGR in the company’s volumes over FY2011-13E.
Outlook and valuation: We expect TVSSL to post a 23% revenue CAGR over
FY2011-13E to `1,636cr, aided by an 11% volume increase. The operating
margin of the company is expected to increase by 174bp to 10.1% in FY2013E
on the back of the expected softening of rubber prices. We expect PAT to grow at
a CAGR of 35% over FY2011-13E to `71cr in FY2013E. At `314, TVSSL is trading
at 3.4x FY2013E earnings and P/B of 1.1x for FY2013E. We maintain our
Buy recommendation on the stock with a target price of `464, based on a target
PE of 5x for FY2013E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
TVS Srichakra (TVSSL) reported a mixed set of numbers for 2QFY2012. The
company’s net sales witnessed robust growth of 31.3% yoy to `354cr, which
resulted in a 109bp yoy increase in the company’s OPM to 9.3%. However, PAT
increased only by 11.1% yoy to `11cr, mainly due to high interest cost as loans
have increased substantially to `385cr for 1HFY2012. We expect the company to
report profit of `48cr and `71cr for FY2012E and FY2013E, respectively. We
maintain our Buy recommendation on the stock.
Expansion at Madurai plant and better performance of two-wheeler sales to drive
volume: TVSSL increased its capacity substantially in FY2010 at its Pantnagar
plant to meet the growing demand for tyres. Consequently, in 1HFY2012, the
company’s debt increased to `385cr because of the expansion plan carried out at
the Madurai plant to increase its SKUs (Stock Keeping Units). Also, the major
segment, the two-wheeler segment, to which the company caters, has witnessed
growth of 15% YTD and is expected to witness a 13% CAGR over FY2011-13E.
These factors will lead to an 11% CAGR in the company’s volumes over FY2011-13E.
Outlook and valuation: We expect TVSSL to post a 23% revenue CAGR over
FY2011-13E to `1,636cr, aided by an 11% volume increase. The operating
margin of the company is expected to increase by 174bp to 10.1% in FY2013E
on the back of the expected softening of rubber prices. We expect PAT to grow at
a CAGR of 35% over FY2011-13E to `71cr in FY2013E. At `314, TVSSL is trading
at 3.4x FY2013E earnings and P/B of 1.1x for FY2013E. We maintain our
Buy recommendation on the stock with a target price of `464, based on a target
PE of 5x for FY2013E.
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