Buy TVS Motor Company; target of Rs 800: Emkay Global Financial

Emkay Global Financial is bullish on TVS Motor Company has recommended buy rating on the stock with a target price of Rs 800 in its research report dated October 21, 2021.

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Emkay Global Financial’s report on TVS Motor Company

Q2 EBITDA margin expanded by 70bps yoy to 10%, above our estimate of 8.7%, aided by the restoration of export incentives, higher spare-part sales and a one-time benefit (0.4% of revenues) relating to export incentives of the last two quarters. Revenues rose 22% yoy to Rs56.2bn, above our estimate of Rs54bn, mainly due to a 39% jump in spare-part sales. The domestic 2W volume outlook is positive, and premium motorcycles/scooters could outperform ahead. In addition, the export outlook is encouraging, owing to healthy demand in Africa and Latin America regions. We expect 11% volume CAGR over FY22-24E. TVSL board approved the incorporation of a subsidiary to undertake the electric mobility business. It will invest Rs10bn on product development and capacity expansion. EV launches are targeted at segments such as premium scooters, high-performance sporty motorcycles, commuter space, delivery market and 3Ws.

Outlook

We increase FY22-24 EPS estimates by 1-3% on higher revenue assumptions. We expect robust revenue/earnings CAGRs of 13%/27% over FY22-24E. Retain Buy with a TP of Rs800 (Rs780 earlier), based on 24x Dec’23E EPS (25x Sep’23E earlier) and the value of TVS credit services at Rs26/share.

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