Views on TVS Motor 3QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst – Auto & Auto Ancillary, Angel Broking) on TVS Motor 3QFY2014 results:

TVS Motor results in-line with estimates

TVS Motor stock up ~4% post results

"For 3QFY2014, TVS Motor Company (TVSL) posted strong results, which were broadly in-line with our estimates, led by strong exports performance (volumes up 26.1% yoy) and superior product-mix. Top-line grew by a strong 13% yoy (3.5% qoq) to Rs. 2,058cr, in-line with our estimates of Rs. 2,051cr, on the back of an impressive 12.7% yoy (1.7% qoq) growth in net average realization. The net average realization was aided by superior product-mix (higher share of scooters, three-wheelers and exports) and also due to better realization on the exports front. Total volumes though remained flat due to weakness in the domestic segment which witnessed a volume decline of 3.2% yoy. EBITDA margins remained stable on a sequential as well as yoy basis at 6%, in-line with our estimates of 6.1%. On a yoy basis, the impact of increase in raw-material cost as a percentage of sales (~160bp) was mitigated by increase in other expenditure (~120bp) & employee expense (~30bp) as a percentage of sales leading to flat margins. Driven by a strong operating performance and sharp decline in finance cost, adjusted net profit grew strongly by 31.2% yoy (17.5% qoq) to Rs. 69cr, in-line with our estimates of Rs. 69cr.

The stock has outperformed over the past six months (gains in excess of 100%) on expectations of the success of the new launches like, Jupiter and Phoenix and strong performance on the exports front. We expect the operating environment to improve for the company given that its new scooter launch, Jupiter has been accepted well by the markets. The company further intends to launch one more scooter (upgraded Scooty) to consolidate its position in the segment. Additionally, the volumes would also get a boost from the new launches in the motorcycle segment, strong focus on exports and entry into Nigerian market. At the CMP, the stock is trading at 11x FY2015E earnings. We shall revise our earnings estimates post the management interaction. Until then, we maintain our Neutral rating on the stock."

TVS Motor 3QFY2014 Result Review (CMP: Rs. 71/ TP: -/ Recommendation: Neutral)

Source : Equity Bulls

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