Motilal Oswal's research report on TVS MotorVolume grew 9.5% YoY (-6% QoQ) to 660k units, with exports down ~6% YoY. Realization improved by ~2% QoQ (+4.6% YoY) to ~INR42.6k (vs. our estimate of ~INR42.9k), driven by a better product mix. Net sales grew by ~14.6% YoY (-4.2% QoQ) to INR28.1b (vs. our estimate of ~INR28.4b). While gross margin improved by ~140bp QoQ to ~29.8%, EBITDA margin declined by 40bp QoQ (+20bp YoY) to 6.3% (vs. our estimate of 7%) due to higher other expenses (+INR550m QoQ) related to Auto Expo (biennial), dealer conference and Victor launch. However, higher other income and lower tax boosted the adjusted PAT to INR1.18b (vs. our estimate of INR1.1b), up 30% YoY and +9% QoQ. We have lowered our estimates for FY17/18 by 5% after factoring in weak exports. We see three key catalysts over the next three quarters, viz. a) Ramp-up of Victor from 1QFY16, b) Benefits of normal monsoon expected in 2QFY17 (~40% of volume contributed by rural markets) and c) Launch of BMW Alliance product in 2HFY17. TVSL trades at 20.3x/17x FY17E/18E EPS. Maintain Buy with a target price of INR339 (~18x FY18E EPS + ~INR33/share for BMW alliance). For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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