Emkay Global Financial has given Buy recommendation for TVS Motor Company with a target price of Rs. 800 in its research report issued on Oct 21, 2021

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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