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Hold TVS Motors; target of Rs 439: Prabhudas Lilladher

October 18
17:25 2019

Prabhudas Lilladher’s research report on TVS Motors

TVSL’s results were operationally better as EBITDA margins came in at 8.8% (PLe: 7.7%), expanding +20bp YoY/ +80bp QoQ. The margins beat was led by lower RM (20bp QoQ), cost control benefits (130bp QoQ). Going forward, while the management guided for sustenance of margins led by positive impact of a) RM decline, b) decline in import content and c) higher exports, it sounded cautious 2W industry demand over coming 3-4 quarters. We believe decline in domestic 2W volumes to partially offset by continued healthy momentum in exports. However, we remain cautious on the margin outlook, especially with the incremental costs related to the implementation of BSVI norms in a muted demand environment wherein full pass-on of these costs might be challenging. Factoring in the above, we have built-in overall volume growth of -5%/+9.5% and margins at ~8.7% for FY20/21E respectively. We estimated revenue/EBITDA/Adj. PAT CAGR of 9%/12%/16% in FY19-22E.

Outlook

We arrive at new price target of Rs439 (earlier Rs407), at 19x roll forwarded to Sep-21 core EPS and Rs40 for NBFC. Maintain Hold.

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