Hold TVS Motor Company; target of Rs 352: Arihant Capital

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Arihant Capital 's research report on TVS Motor Company

TVS Motor (TVS) reported a 44.8% YoY decline in its standalone net profit to Rs739mn for the Q4FY20 due to a 30% fall in its quarterly total sales volume. The company had reported a profit Rs1338mn in Q4FY19. The company has reported a decline of 21% YoY in its standalone revenue from operations at Rs34,814mn for the Q4FY20 under review as compared to Rs43,840 mn in the Q4FY19. EBITDA stood at Rs 2449mn, down 20.5% YoY for Q4FY20 as compared to Rs 3081mn in the Q4FY19, EBITDA margin was flat at 7% in Q4FY20 on account of negative operating leverage. Going forward, commodity prices will continue to remain benign which will support margins. The results suggest the company cut its expenses for the March quarter by about 20%, largely led by reduced cost of materials consumed along with the finished goods related cost absorption.

Outlook

We value TVS Motors at PE of 31x to its EPS estimate of Rs 11.35 for FY22, which yields a target price of Rs 352. We downgrade our rating to Hold from Accumulate earlier.

For all recommendations report, click here

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