{LONGTERMINVESTORS} Earnings Update - TVS Motors (TVSL IN ) - Strong scooter sales drove the revenues

 

Dear All,

Strong scooter sales drove the revenues

§  In 3QFY16, revenues grew (11.4%YoY, 2.0% QoQ) to INR 29.4bn driven by steady volume growth of 7.1% YoY.

§  Gross margins increased by 180bps YoY to 28.4%. EBITDA grew by 26.3% YoY to INR 2.02bn. EBITDA margins increased by 80bps YoY to 6.9%. Other operating cost as % of sales increased YoY from 14.6% to 15.7% that constrained EBITDA margin expansion.

§  Net profit grew 19.4% YoY to INR 1.07bn. PAT margin improved only by 30bps YoY to 3.7% as interest cost as % of sales increased YoY from 0.2% to 0.34%, while depreciation cost as % of sales increased YoY from 1.4% to 1.7%.

§  Scooter sales grew 25% YoY to 0.23mn units driven by robust festive sales for Jupiter and Wego models. Motor cycle sales grew by 5% YoY to 0.26mn units amid muted rural sales. 3W sales volume de-grew 6.8% YoY to 26225 units. Exports grew 0.93% YoY to 1,08,000 units.

Valuation: New product launches, sustained market share gains in scooter segment and improving margins are amongst the key positives. The stock is currently trading at 20.3/16.3X FY17E/18E EPS respectively.. We arrive at a target price of INR 325, assigning a PE of 18X FY18E earnings and rate the stock as OUTPERFORMER.

Risks:  Rise in commodity prices and slowdown in scooter sales growth.

 

Regards

CSEC Research

 

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