Arihant Capital's research report on TVS MotorA comprehensive product portfolio with good market acceptance of new products and steady growth in sales has enabled TVS Motor Company to post a 12% revenue growth during the financial year 2015-16. During the year the company recorded total sales of 26.79 lakh units. TVS reported decent set of numbers for Q4FY16. Volume for the company grew by 9.8% while realisations grew by 5% on YoY basis. Scooters grew by 19%, Motorcycles grew by 12%, Mopeds grew by 3% and 3W declined by 20% on YoY basis. Total number of units sold for the quarter was 6.60 lakh. The export market, which accounts for nearly 20% of total volume, is exposed to currency fluctuations and shortage of foreign exchange in the key African markets. Net revenues rose 15.3% to Rs. 2,776 crs on YoY basis. Contribution margin increased by 22 bps on YoY basis due to soft raw material prices which declined to 71.2% of revenues as compared to 71.5% on YoY basis. However, operating EBITDA margin for the quarter increased by 19 bps to 6.43% (far lower than expectation of 6.9%). Adjusted Profit after tax for the quarter increased by 30.1% to Rs. 117 crs on YoY basis (largely due other income). Considering well positioned scooter portfolio, robust product pipeline coupled with possibility of disproportionate gains on new launch success and further gains from TVS-BMW alliance, we continue to remain positive on the stock. The stock at Rs. 287 trades at 25.4x our estimated FY17 EPS of Rs 11.3 per share. We have assigned a price target of Rs 316 per share based on PE of 28x its FY17 estimates. We recommend ‘HOLD rating on the stock. 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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