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Sell TVS Motors: HDFC Securities
HDFC Securities is bearish on TVS Motors and has receommended sell rating on the stock. Broking house believes that the company will be more vulnerable to the slowdown in the two-wheeler sector, compared to its peers.
HDFC Securities is bearish on TVS Motors and has receommended sell rating on the stock. Broking house believes that the company will be more vulnerable to the slowdown in the two-wheeler sector, compared to its peers.
HDFC Securities report on TVS Motors:
Net Sales of TVS Motors grew by 9.6% yoy during Q4FY07 to stand at Rs 9.2 billion. The growth in top-line was driven by a 5% volume growth and 4% realization growth. Operating profit declined by a whopping 79% yoy to Rs.100.8 million, leading to a 460 bps drop in OPM, which stood at 1.1%. This drop in OPM was mainly due to higher raw material costs, which grew by 18.3% yoy. Supported by higher other income, the net profit during Q4FY07 decreased by 68.9% yoy to stand at 9.05 million. EPS for Q4FY07 stood at Rs 0.4 vis-à-vis Rs 1.2 in Q4FY06.
Overall, the two-wheeler sector is progressively slowing down due to higher interest rates and unavailability of finance. We continue to be concerned at TVS Motors' earnings growth uncertainty, as the scope for margin improvement appears slim in the prevailing competitive scenario. At the CMP of Rs 60, the stock trades at 21.4x and 18.2x its FY07 and FY08E earnings respectively. We continue to maintain our negative view on the stock, as we believe it will be more vulnerable to the slowdown in the two-wheeler sector, compared to its peers. We reiterate SELL.
