TVS Motor jumps 3% after Q2 results, but global brokerages have a different view

Share prices of TVS Motor Company was trading higher by over 3 percent intraday on October 18 after the company posted better numbers for the quarter ended in September.

The company has reported 20 percent jump in its Q2FY20 standalone net profit at Rs 255 crore against Rs 211.31 in the same quarter in 2018. The revenue of the company was down 13 percent at Rs 4,347.8 crore versus Rs 4,993.47 crore.

Meanwhile, earnings before interest, tax, depreciation and amortization (EBITDA) was down 10.8 percent at Rs 382 crore versus Rs 428.1 crore.

Also Read: TVS Motor September quarter results: Decent show, but valuation too high

The stock has gained over 17 percent in the last three days and has witnessed spurt in volumes by more than 1.38 times.

However, global brokerages have a different view on the stock despite the company posting better numbers.

The global research firm has a reduce rating on the stock and has raised the target to Rs 375 from Rs 358 per share. It is of the view that September quarter numbers were a beat but the outlook is weak, adding that volumes are likely to remain under pressure over FY20-21.

Normura feels that TVS Motor's valuations are expensive at current levels while margin estimates increased by 50 bps to 9.1 /8.4 percent for FY20/21. The firm has, however, raised EPS estimates by 3.7/ 6.6 percent for FY20/21.

CLSA has a sell call on TVS Motor and has raised target to Rs 380 from Rs 360 per share. It is the view that 27x FY21 PE is too expensive amid weak demand and big cost push. The margin is flattish YoY despite lower volumes and slightly above estimates.

The brokerage firm has a cautious view on the two-wheeler industry given the weak demand. It added that export outlook had also softened due to slowing global economic growth. It feels that the margin is unlikely to improve much amid weak demand and intense competition, and said that the valuation at 27x FY21 PE was expensive.

TVS Motor Company was quoting at Rs 452.00, up Rs 14.85, or 3.40 percent. It has touched an intraday high of Rs 459.70 and an intraday low of Rs 428.75.

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