Arihant Capital has given Accumulate recommendation for TVS Motor Company with a target price of Rs. 718 in its research report issued on May 06, 2022

Arihant Capital’s research report on TVS Motor Company

TVS Motor Company has reported weak Q4FY22 numbers, below our estimate on all fronts. Standalone revenue stood at INR 55,303 Mn, against our estimate of INR 55,923 Mn registering – 3.1% YoY/+3.9% QoQ. EBITDA stood at INR 5,568 Mn, against our estimate of INR 5,840 Mn, Registering a growth of 11.2%YoY/- 2.0%QoQ. On the margins front, EBITDA margin up by bps 11bps QoQ/-1bps YoY to 10.07 %, against our estimate of 10.4%, despite various challenges in terms of increase in input costs and shortage in semiconductors. Standalone PAT saw a de-growth of 5.1%YoY/4.8% QoQ to INR 2,745 Mn against our estimate of INR 3,126 Mn. EPS stood at INR 5.8 in Q4FY22 against INR 6.07 in Q3FY22 (INR 6.09in Q4FY21). The company registered a de-growth of 7.7% YoY/ 2.5% QoQ to total two-wheeler sales of 8.56 Lakh units in the Q4FY22 as against 9.27 Lakh units in the Q4FY21.On the exports front, 2w sales clocked 1.09 million units in FY22. The company has achieved this significant milestone for the first time in a financial year. The company declared interim dividend of INR 3.75 per Share for FY22 absorbing a sum of INR. 178 Crores. PBT, before exceptional items for year ended March 2022, grew by 50% at INR. 1,243 Crores. During the year, the company incurred INR 30 crores towards COVID-19 related expenses, an exceptional item.

Outlook

We value TVS Motors’ standalone business at FY24 PE of 20x to its EPS estimate of INR 34.2 for FY24 and TVS credit services at 1x its BV (INR~35/ share), which yields a revised target price of INR 718( earlier target price: INR 735 on a SOTP basis). We maintain our Accumulate rating on the stock.

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