Emkay Global Financial's research report on TVS Motor
Q2FY23 EBITDA grew by 31% YoY (3-yr CAGR at 24%) to Rs7.4bn, slightly below our estimate due to increase in commodity costs and marketing spends. Management expects margin to improve in H2FY23, on price increases and commodity deflation. Revenue increased by 28% (3-yr CAGR at 18%) to Rs72bn, coming in 4% above our estimates, due to better-than-expected realizations. We increase our FY23-25E EPS by 1-4%, factoring-in higher volume assumptions. We maintain our positive stance, underpinned by: 1) expectations of a cyclical upturn in domestic 2Ws which generally lasts for three years at least; 2) increasing focus on EVs and premium models; 3) market-share gains in the domestic & overseas markets; and 4) margin expansion emanating from better scale and cost savings.
Outlook
We reaffirm BUY with a TP of Rs1,250 (Rs1,200 earlier), based on 25x Dec-24E EPS (Sep-24E earlier) and value of TVS Credit Services at Rs27/share. Key downside risks are lower-than-expected demand in key geographies, increased competitive intensity, failure of new products, and adverse movement in commodity prices/currency rates.
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