TVS Mo­tor Com­pany Ltd

Money Times - - Stock Watch - By Amit Ku­mar Gupta

(BSE Code: 532343) (CMP: Rs.707.90) (FV: Re.1) (TGT: Rs.780+)

TVS Mo­tor Com­pany Ltd (TVS) is en­gaged in the man­u­fac­ture of mo­tor­cy­cles, scoot­ers, mopeds, three-wheel­ers, parts and ac­ces­sories. Its mo­tor­cy­cles in­clude Apache Se­ries RTR, Phoenix 125, Vic­tor, StaR City+, Sport and Max4R. Its scoot­ers in­clude Jupiter, Wego, Scooty Zest 110, Scooty Streak and Scooty Pep+. Its mopeds in­clude XL 100, XL Su­per and XL Su­per Heavy Duty. Its three-wheeler in­cludes TVS King. Its TVSM Ser­vice (Beta) mo­bile ap­pli­ca­tion fea­tures in­clude ser­vice sched­ules, ser­vice book­ing and news and up­dates, etc.

TVS has 4 man­u­fac­tur­ing plants - 3 in In­dia (Tamil Nadu, Kar­nataka and Hi­machal Pradesh) and 1 in In­done­sia. It has a deal­er­ship net­work of 1,100 main deal­ers and 3,000+ sub-deal­ers. It added 150 new deal­ers in H1FY18. Cur­rently, its in­ven­tory lev­els are nor­mal at 30-32 days. Its sub­sidiaries in­clude PT. TVS Mo­tor Com­pany In­done­sia, TVS Mo­tor Com­pany (Europe) B.V., TVS Mo­tor (Sin­ga­pore) Pte. Ltd, Sun­daram Busi­ness De­vel­op­ment Con­sult­ing (Shang­hai) Com­pany Ltd and Sun­daram Hold­ing USA Inc. Mo­tor­cy­cles, scoot­ers, mopeds and three-wheel­ers con­trib­ute 38%, 23%, 35% and 4% re­spec­tively, to the over­all vol­umes. Ex­ports (mainly Africa) cur­rently ac­count for 15% of its over­all vol­umes.

In Q2FY18, TVS’ rev­enue grew 18.3% YoY to Rs.40.5 bn led by vol­umes growth of 17% YoY and 2% YoY growth in re­al­iza­tion. EBITDA grew 27% YoY to Rs.3.5 bn. EBITDA mar­gin im­proved by 50 bps YoY to 8.6% led by lower RM/sales cost and bet­ter op­er­at­ing lever­age. The man­age­ment in­di­cated to achieve dou­ble-digit mar­gin in Q4FY18E and ex­pects to main­tain dou­ble-digit mar­gin FY18E on­wards. TVS took a price hike of Rs.250 in Septem­ber 2017. PAT grew 20% YoY to Rs.2.1 bn. Dur­ing the quar­ter, its over­all two-wheeler sales in­clud­ing ex­ports grew 16.1% YoY to 0.92 mn units. Mo­tor­cy­cle sales grew 9.9% YoY to 0.36 mn units. Scooter sales grew 43.2% YoY to 0.33 mn units in Q2FY18. It ex­ported 0.14 mn units of two and three-wheel­ers, reg­is­ter­ing a growth of 32.1% YoY. Three-wheeler sales grew 23.8% YoY to 25,248 units.

Dur­ing the quar­ter, TVS made in­vest­ments of Rs.960 mn in its sub­sidiaries. Its mar­ket share is grow­ing in the fast­grow­ing scooter seg­ment (up 270 bps YoY in scoot­ers to 15.8% in YTDFY18) along with strong vol­ume growth. The man­age­ment ex­pects stronger growth in H2FY18E on the back of good mon­soon and lower base. It has guided for capex of Rs.6 bn for FY18. TVS-BMW is ex­pected to be launched in H2FY18.

Tech­ni­cal Out­look: The TVS stock looks very good on the daily chart for medium-term in­vest­ment. It is mov­ing in a strong up­trend while mak­ing a higher high and higher low for­ma­tion. The stock trades above all im­por­tant mov­ing av­er­ages like the 200 DMA level.

Start ac­cu­mu­lat­ing at this level of Rs.707.90 and on dips to Rs.667.90 for medium-to-long-term in­vest­ment and a pos­si­ble price tar­get of Rs.780+ in the next 12 months.

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