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Kotak maintains sell on TVS Motor as investments and acquisitions raise concerns

The company reported negative free cash flow of Rs 690 crore in FY22 due to a sharp increase in investments.

June 21, 2022 / 10:27 AM IST
Representative image.

Representative image.

Kotak Institutional Equities has maintained a sell rating on TVS Motor and revised its target price to Rs 600 a share, a downside of nearly 17%.

The brokerage firm says sharp increase in investments and weak profitability of acquired entities remain a concern.

The company reported negative free cash flow of Rs 690 crore in FY22 due to a sharp increase in investments.

The company incurred capex of Rs 730 crore, up 31% year on year. Investments saw a 3.3 times jump to Rs 1350 crore in FY22.

During the year, TVS Motor's TVS Singapore bought 75% stake in Swiss E-Mobility Group (SEMG) for $100 million at an expensive valuation, going by Kotak.

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The firm also bought an 80% stake in GO Corporation for $17.7 million. Also, TVS Motor will be investing 100 million pounds in Norton Motorcycles, the most iconic sporting motorbike brand in the United Kingdom, for product launches in internal combustion engine and electric vehicle segments as well as upgrade of technology and manufacturing capabilities. But Kotak believes global e-bike and premium motorcycle profitability are unattractive.

"The company remains optimistic on their current investments; however, profitability of SEMG as well as global motorcycle OEMs (original equipment makers) remains uninspiring," said Kotak.
Moneycontrol News
first published: Jun 21, 2022 10:19 am
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