Accumulate TVS Motors; target of Rs 665: Prabhudas Lilladher

Prabhudas Lilladher's research report on TVS Motors

For Q3FY19, TVS motor's EBITDA margins stood at 8.1%, where revenues were higher 27% YoY on the back of strong volume growth of 20% YoY, despite the overall industry demand being tepid on account of higher insurance costs as well as the liquidity crisis. Management expects TVS to continue to outperform the industry with growth being driven by success of the new launches (Ntorq and Radeon) and filling up of gaps in its product portfolio. For achieving the earlier stated long-term target of double digit margins, we feel volume growth would be key as it would provide much needed operating leverage benefits to combat the incremental costs related to the implementation of BSVI norms. Despite the muted industry scenario, we expect TVS to continue to outperform the industry and build in overall volume growth of 14.7%/14.4% for FY20/21e respectively.

Outlook

We maintain "Accumulate" with a price target of Rs665, based upon a PE of 24x Sep21E. TVS currently trades at a PER of 29x FY19E EPS and 22x FY20E EPS.