Sell TVS Motors; target of Rs 417: Dolat Capital Market

Dolat Capital Market's research report on TVS Motors

TVS Motor (TVSL)'s Q2FY21 numbers were broadly in line with estimates. EBITDA grew 13% YoY to Rs 4.3bn with expanded margin at 9.3% due to cost control initiatives and benefit of operating leverage. The company has seen marginal growth in retail sales during the Navratri period and is cautiously optimistic about Diwali sales with increasing preference for personal mobility and improvement in rural sentiment. Urban demand is also catching up well with lockdown restrictions easing out. With stabilization of crude prices and re-opening of economies, export volume is also showing promising recovery and expects strong sales in 2HFY21.

Outlook

We forecast 53% earning CAGR over FY21-23E led by 15% volume growth and 140bps margin expansion. At CMP, the stock is trading at 28/22x on FY22/23E earnings, which appears expensive compared to its peers. We maintain our Sell rating with target price Rs 417 (based on 20x of FY23E EPS + value of TVS Credit Services at Rs 26/share).

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