TVS Motor Company Ltd
(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.