Q3FY18 results
Key positives: Higher than expected realisations
Key negatives: Lower other income
Change in estimates: We cut our estimates for FY18 by 3% on account of lower other income. Maintain FY19/20 estimates
Valuations & view
While we recognise that TVS Motors has been able to gain marketshare in the premium motorcycle space with the success of the Apache, however, we believe that its pricing power in the other segments is limited. While the management sounds confident of double digit margins in Q4FY18, we believe that there could be challenges given A&P spends should rise with new product launches at a time when commodity cycle is strengthening. Further, we believe that the valuations (~32xFY19E EPS) seem to build in a high degree of optimism on future market share gains (YTD TVS 2W market share is flat)/earnings growth. Maintain Underperformer with a target price of Rs575 (21XFY19E EPS and Rs50 for the BMW JV).
TVS Motor Company Limited. TVS Motor Company Limited is engaged in the manufacturing of motorcycles, scooters, mopeds, three wheelers, parts and accessories. The Company's motorcycles include Apache Series RTR, Phoenix 125, Victor, StaR City+, Sport and Max4R. Its scooters include Jupiter, Wego, Scooty Zest 110, Scooty Streak and Scooty Pep +. Its mopeds include XL 100, XL Super and XL Super Heavy Duty. Its three wheelers include TVS King. It has approximately four manufacturing plants, approximately three located in India (Hosur, Tamil Nadu; Mysore, Karnataka, and Nalagarh, Himachal Pradesh) and one in Indonesia (Karawang). The Company's TVSM Service(Beta) mobile application features include service schedules, service booking, and news and updates, among others. Its subsidiaries include PT. TVS Motor Company Indonesia, TVS Motor Company (Europe) B.V., TVS Motor (Singapore) Pte. Limited, Sundaram Business Development Consulting (Shanghai) Company Limited and Sundaram Holding USA Inc., among others.
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