December 26, 2016 / 16:48 IST
Centrum's research report on TVS Srichakra
SRTY reported 2QFY17 PAT of Rs 482mn against our estimate of Rs 500mn. While both top line and margins were below our estimates, lower than expected tax outflow helped limit the miss at PAT level. Although we remain convinced that TVS Srichakra is one of the best companies in the domestic tyre segment, we see limited upside from current levels, given a) steep run up in share prices over last few months (+38% in last six months), b) impact of demonetisation and c) increase in rubber prices. Consequently we downgrade the stock to Hold with a target price of Rs 3,175.
Outlook
We revise our estimates and multiple to factor in the impact of demoneisation, increasing competition and 2QFY17 results. While we continue to like the company, we see limited upside from current levels, given a) steep run up in share prices over last few months, b) impact of demonization and c) recovery in rubber prices. Downgrade to hold with revised TP of Rs 3,175 (based on 10% discount to its historical adjusted cash flow/EV yield).
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