Prabhudas Lilladher recommended hold rating on TVS Motors with a target price of Rs 405 in its research report dated July 22, 2019.
Prabhudas Lilladher's research report on TVS Motors
TVSL's results were operationally healthier with EBITDA margins at 8% (PLe: 7.2%), expanding +30bp YoY/ +100bp QoQ. The margin beat was led by higher-than expected decline in RM, cost control benefits and favorable forex movement. Going forward, while the management guided for sustenance of margins led by positive impact of a) RM decline, b) decline in import content and c) higher exports, it sounded cautious with downward revision in domestic 2W industry guidance to flat/negative in FY20 (v/s marginal growth earlier). TVSL will continue to outperform the industry driven by success of the new launches (Ntorq and Radeon) and strong export outlook. We remain cautious on the margin outlook, considering sizable incremental costs to implement BSVI norms in a muted demand environment, which is difficult to pass-on. Factoring the above, we have built-in overall volume growth of ~4%/6% and margins at 8.3% each for FY20/21E respectively.
Outlook
We arrive at price target of Rs405, at 19x FY21 core EPS (in-line with 10 year LPA) and Rs54 for NBFC. Maintain Hold.
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