SPA Securities' report on TVS Motor Company
TVS Motor Company (TVS) reported mixed quarterly performance, with the expectation of continuation of demand recovery which looks cloudy. The near-term outlook is uncertain as the pent-up demand has been slowly diminishing and the preference of consumers are trending towards lower priced 2Ws, where TVS presence is minimal. Sales expectations from its most profitable segments (3W & exports) also remain blurry. This, along with frequent local level lockdowns is creating supply side issues. We believe, in FY21e, TVS would grow lower than the industry due to downtrading and competitive prices in the entry segment will hurt its Mopeds sales. In our view, current valuations are elevated and hence we recommend ‘Reduce’.
Outlook
We have factored in all the visible uncertainties related to Covid-19 and built a sharp recovery in FY22e volumes (after two years of high double-digit de-growth). However, considering elevated valuations, we recommend ‘Reduce’ rating with a target price of Rs 357 (20x FY22e EPS plus the value of TVS Credit at Rs 37/share).
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