MOSL: TVS MOTOR COMPANY (Neutral)-EBITDA in line, guides for marginal 2W industry growth in FY20
TVS Motor Company: EBITDA in line, guides for marginal 2W industry growth in FY20
(TVSL IN, Mkt Cap USD3.4b, CMP INR491, TP INR480, 2% Downside, Neutral)
- Realizations at record level: Volumes grew 2% YoY (-8% QoQ), while realizations increased 7.2% YoY (+2.5% QoQ) to INR48.3k (our estimate: INR46.5k). Revenue grew 9% YoY to INR43.8b (our estimate: INR42.2b). Lower scooter contribution hit the gross margin, while negative operating leverage led to EBITDA margin erosion of 110bp QoQ (-40bp YoY) to 7% (our estimate: 7.3%). Adj. PAT declined 19.2% YoY (-25% QoQ) to INR1.3b. For FY19, revenue/EBITDA/PAT grew 20%/22%/1%.
- Earnings call highlights: (a) FY20 growth outlook for the industry is tepid, with prospects for only 2HCY19 looking good; TVSL is likely to outperform industry. (b) Inventory for TVSL is at five weeks (within the normal range of 4-5 weeks). (c) The company is aggressively reducing cost via alternative sourcing, VAVE, increased localization and fixed cost reduction. (d) Financing penetration has consistently increased to 44% of volumes now v/s 38% in FY18. (f) NBFC arm has ~49% share of financing and loan book of ~INR83.3b.
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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