MOSL: TVS MOTOR COMPANY (Buy)-Adjusted margins better than estimates-strong EPS growth to continue
​TVS Motor Company: Adjusted margins better than estimates; strong EPS growth to continue
(TVSL IN, Mkt Cap USD3.7b, CMP INR503, TP INR581, 16% Upside, Buy)
- RM cost inflation hurts margins, but recurring margin at 7.8%: Total volumes grew 2% YoY (-6.3% QoQ) to 673.6k units. Realizations declined marginally by 0.3% YoY (+1.7% QoQ) to ~INR42.2k. Net sales grew 1.7% YoY (-4.7% QoQ) to INR28.5b. Reported EBITDA margin shrunk 140bp YoY (~160bp QoQ) to 5.7% (est. of 6.7%). However, adjusted for higher discounts due to BS-3 inventory sales (INR571m) and sales tax incentive (INR316m for FY17, ~INR80m for 4Q accounted below EBITDA), recurring EBITDA margin was at 7.8%. Lower tax boosted reported PAT to ~INR1.27b (est. of ~INR1b; -7% YoY).
- Earnings call highlights: a) Expects domestic 2W industry to grow 6-8% in FY18; TVSL to gain 1.5-2bp market share. b) Double-digit margin target slightly delayed due to demonetization; now expects FY18 exit margins to be in double-digit. c) BMW Alliance: Started BMW G310R supplies from Dec-16, with ~4,700 units in FY17. d) Price hike: Took price hike of INR500-1,000/unit in 4QFY17 and another INR200-300/unit in Apr-17. e) TVS Credit Services: TVSL has option to convert its preference shares to equity shares, which would result in 83-84% stake.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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