Chola Securities
TVS Motor (Outperformer)
CMP: ₹523.05
Target: ₹607
In 3QFY19, TVS Motor’s revenue grew by 26 per cent y-o-y to ₹4,660 crore above CSEC estimate of ₹4,520 crore driven by strong volume growth. Volumes grew by 20 per cent y-o-y; while realisations grew by about 5 per cent y-o-y (+3 per cent q-o-q). The growth in realisations was on account of a price hike of 0.6 per cent during the quarter in addition to better product mix. Exports sales volumes grew by 25.8 per cent y-o-y and three-wheeler sales grew by 47 per cent y-o-y.
Valuation: TVS Motor posted a robust volume growth in 3QFY19 amidst challenging environment i.e. increase in insurance costs, muted festive season and liquidity issues. Management expects 4QFY19 to be better as the liquidity issues are subsiding. The company would be taking a meagre price hike on select models in January 2019. We introduce and rollover the valuation to FY21E. At CMP, the stock is trading at P/E of 25.1X/19.9x on FY20E/FY21E EPS, respectively. We arrive at a revised price target of ₹607 based on P/E of 23x FY21EPS and rate the stock an Outperformer.
Risks: Reversal in export trends and a slowdown in scooter sales growth.