TVS Motor - Company Update

Published on December 2016 | Categories: Documents | Downloads: 174 | Comments: 0 | Views: 184
of 5
Download PDF   Embed   Report

Comments

Content

March 05, 2012

Underperformer
TVS Motor Company Ltd
Industry: Automobiles Industry View: Neutral

LKP
Since 1948

Company Update

“Consistent underperformance”
Volumes fail again
A continuous muted volume performance by TVS over the past few months has backed our negative view on the stock to a higher extent. In the month of October, the company had guided to sell more than 2 lakh units per month after a stellar performance in September (2.19 lakh). However, in October TVS sold just 1.83 lakh units, which since then have been dipping consistently. In February, the company posted a sales decline of 3% yoy and 1% qoq at 172,061 units. In view of slowdown in the 2W segment and cut throat competition, TVS is consistently losing ground and has slipped from its third largest player status in India to fourth place as Honda has been overtaking TVS since last 3months. The gap between TVS and Honda’s 2W volumes has also been widening as this gap which was of ~18,000 units in January has more than doubled to ~37,000 units in February. We have cut our volume estimates for TVS and now expect them to grow at 7% in FY 12E v/s YTD growth of 8.5% and 5.5% in FY 13E.
Stock Data Current Market Price (`) Target Price (`) Potential upside (%) Reuters Bloomberg 46 50 9 TVSM.BO TVSL IN

Key Data Market Cap (`) 52-Week Range (`) Avg. Daily Trading Value (Rs.mn) Promoters (%) FII Holding (%) DII Holding (%) Public & Others Holding (%)

21 70/ 45 143 59 5 16 20

Y/E March

FY10 46,786 6.14 1.71 1.69 N/A 27.2 3.5 11.3 14.0 12.9 0.9

FY11 65,702 6.22 2.33 3.22 90.6 14.3 3.2 7.8 38.0 22.4 1.2

FY12E 69,114 7.25 3.03 4.41 36.7 10.4 2.5 6.2 43.8 23.9 1.5

FY 13E 75,253 7.34 3.17 5.02 14.0 9.2 2.0 5.7 32.4 21.7 1.6

Competition to hurt across the segments, new launches may help a little
Scooters - Devoid of any significant launches over the past few quarters, and with an aged product portfolio with gaps in it, TVS lost market share in each of its segments of operation. In the bread and butter scooter segment, the company has been continuously losing market share to its closest rival Honda. Honda’s Activa which has been facing capacity constraints is sorting out these issues as its capacities are continuously ramping up to the north of 100,000 units. With new plant coming at Bangalore, its FY 13 numbers are expected to widely outperform TVS’s sales numbers. New 2-3 launches from Yamaha which were displayed in the auto expo will get launched in FY 13. Also Suzuki Swish 125, Hero Maestro, Vespa’s comeback with a scooter and a refreshed version of Honda Activa will provide tough competition to TVS’ new scooter planned to be launched by the end of CY 2012. The hybrid scooter Qube which was showcased during the auto expo will be launched in CY 13 along with Hero’s hybrid scooter Leap which will again face the heat. Motorcycles- In the motorcycle segment, two new launches from Hero (Ignitor 125 cc and Passion X Pro 110cc) will crowd the executive segment along with Honda’s Dream Yuga (110 cc) and Bajaj’s upcoming launch in this segment, which will make TVS difficult to reproduce Victor’s magic when it will get relaunched by the end of CY 12. The Radeon 150 cc bike from TVS pitted to get launched in mid 2012 against the likes of Hero, Bajaj and Honda’s premium bikes is not expected to bring anything strikingly different from its competition to the table. Market share losses in this segment are expected to get rapid once the competitive launches start gaining momentum.
Ashwin Patil [email protected] +91 22 6635 1271

Revenues EBITDA (%) PAT (%) EPS (`) EPS growth (%) P/E (x) P/B(x) EV/EBITDA (x) ROCE(%) ROE(%) Dividend yield (%)

Relative Price Performance

145 125 105 85 65 45 25 Mar-11 May-11 Jul-11 Oct-11 Dec-11 Feb-12 TVS Motor BSE Sensex

One Year Indexed (%) Absolute BSE Relative 1 Month 1 12 3 Months 5 26 12 Months (3) 9

Disclaimer: The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true and is for general guidance only. While every effort is made to ensure the accuracy and completeness of information contained, the company makes no guarantee and assumes no liability for any errors or omissions of the information. No one can use the information as the basis for any claim, demand or cause of action. LKP Securities Ltd., and affiliates, including the analyst who have issued this report, may, on the date of this report, and from time to time, have long or short positions in, and buy or sell the securities of the companies mentioned herein or engage in any other transaction involving such securities and earn brokerage or compensation or act as advisor or have other potential conflict of interest with respect to company/ies mentioned herein or inconsistent with any recommendation and related information and opinions. LKP Securities Ltd., and affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past.

ISIEmergingMarketsPDF in-mdidemo from 115.111.95.19 on 2012-04-25 06:16:54 EDT. DownloadPDF. Downloaded by in-mdidemo from 115.111.95.19 at 2012-04-25 06:16:54 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

TVS Motor Company Ltd.

3Wheelers- On the 3W side, the company has seen demand reducing for its much hyped 3W King as its sales have gone down from levels of +4500 to sub 3000 levels. Even the strategy of 3W production getting ramped up from 6000 to 8000 shortly will not help the company as demand itself is weakening for TVS 3 wheelers. This will in fact add to the pressure on operating leverage thus hurting margins which are struggling to touch 8% at the EBITDA level. Opening of government permits in various states is pending since a long time but there is no clarity on the same. Exports – Exports of the company are also shrinking thick and fast (10.4% of volumes in Feb v/s 13.5% yoy), as it can be seen that since August 2011, the exports have fallen by 40% from ~30,000 to 17,960 units. This signifies that competition from the market leaders like Honda, Yamaha and Bajaj in markets like Africa, South Asia, Latam and South East Asia, where TVS has its presence are exerting pressure on TVS. Indonesia, where the company has its subsidiary is also bleeding in losses and is struggling to touch the breakeven 60,000 units target.

Margin performance not expected to see a traction
In line with the lack of operating leverage on the 3W side and slowing demand, we believe the margins which have been always below 8% may not cross this figure although some softening of raw material may slightly help the cause. Volume weakening on 2W side in the wake of competition also may lead to margins getting weakened. Although the company has a 100% market share in moped segment (40% of total volumes), is a drag on the margins as moped is a low realization business. Higher ad spend stemming from prevention of market share decline may also hurt the margin performance. We further cut our margin estimates for TVS’s standalone business from 7.6%/7.8% to 7.4/7.5% in FY 12E/13E respectively as we see an insignificant improvement in pipeline.

Outlook and valuation
Given the weakening operational performance and challenging competitive environment, we are continuing our negative view on the stock. We have cut our earnings estimates in the wake of the expectations of domestic as well as exports underperformance and faltering performance in Indonesia, which we believe may not breakeven even in FY 14 given the competition from Honda, Yamaha and Bajaj Auto and significantly low scale of operations of TVS. Hence, we are cutting our target price from Rs 55 to Rs 50, valued at 10x times (30% discount to Hero) FY 13E consol EPS of Rs 5.02 and maintain out Underperformer rating on the stock.

LKP Research
ISIEmergingMarketsPDF in-mdidemo from 115.111.95.19 on 2012-04-25 06:16:54 EDT. DownloadPDF. Downloaded by in-mdidemo from 115.111.95.19 at 2012-04-25 06:16:54 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

2

TVS Motor Company Ltd.

Scooter sales are nosediving
60,000 50,000 40,000 30,000 20,000 10,000 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 % yoy Feb-12

Motorcycles succumb to competition
35.0% 100,000 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -15.0%
90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 0.0% -5.0% -10.0% -15.0% 20.0% 15.0% 10.0% 5.0%

-10.0% 10,000

Scooters
Source: SIAM , LKP Research

Motorcycles

% yoy

3Wheelers failing to move above the 4000 units p.m. mark
5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 % yoy Feb-12 -40.0% 0.0% -20.0% 20.0%

Exports also breaking down
60% 50% 40% 25,000

80.0% 35,000 60.0% 30,000 40.0%
20,000 15,000 10,000 5,000 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 % yoy Feb-12

30% 20% 10% 0% -10% -20% -30%

3Wheelers
Source: SIAM , LKP Research

Exports

LKP Research
ISIEmergingMarketsPDF in-mdidemo from 115.111.95.19 on 2012-04-25 06:16:54 EDT. DownloadPDF. Downloaded by in-mdidemo from 115.111.95.19 at 2012-04-25 06:16:54 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

3

TVS Motor Company Ltd.

Financial Summary
Income statement
YE Mar (`mn `mn) `mn Total Revenues Raw Material Cost Employee Cost Other Exp EBITDA EBITDA Margin(%) Depreciation Interest PBT PBT Margin(%) Tax PAT PAT Margins (%) Adj PAT Adj PAT Margins (%) FY10 46,786 32,261 2,894 8,756 2,875 6.1 1,367 828 680 1.5 (122) 335 0.7 802 1.7 FY11 65,702 47,418 3,799 10,399 4,087 6.2 1,336 718 2,033 3.1 (505) 1,279 1.9 1,528 2.3 FY12E 69,114 50,313 3,662 10,126 5,013 7.3 1,396 693 2,924 4.2 870 2,094 3.0 2,094 3.0 FY 13E 75,253 54,370 4,210 11,149 5,524 7.3 1,662 587 3,275 4.4 939 2,387 3.2 2,387 3.2

Balance sheet
YE Mar (`mn `mn) `mn SOURCES OF FUNDS Equity Share Capital Reserves & Surplus Total Networth Total debt Net Deferred Tax Liability Total Liabilities Net block Capital WIP Investments Current Assets Cash and Bank Inventories Sundry Debtors Current Liab & Prov Current liabilities Provisions Net Current Assets Miscellaneous expenses FY10 FY11 FY12E FY 13E Total Assets 7,207 720 343 18,682 9,505 985 0 17,727 11,027 1,103 0 20,392 11,172 1,043 0 24,121 1,250 3,416 2,258 432 6,025 2,861 3,177 1,530 6,510 4,092 3,862 2,788 8,113 4,868 4,000 APPLICATION OF FUNDS 11,685 294 3,866 12,938 576 2,208 13,542 776 2,210 13,380 976 2,210 238 5,964 6,201 11,834 518 18,682 475 6,345 6,827 10,567 276 17,727 475 8,300 8,775 11,000 617 20,392 475 10,529 11,004 12,500 617 24,121 FY10 FY11 FY12E FY 13E

Loan, Advances & others 3,498

Key Ratios
YE Mar ` Per Share Data (`) Adj. EPS CEPS BVPS DPS Growth Ratios(%) Total revenues EBITDA PAT EPS Growth Valuation Ratios (X) P E P/CEPS P/BV EV/Sales EV/EBITDA Operating Ratios (Days) Inventory days Recievable Days Payables day Net Debt/Equity (x) Profitability Ratios (%) ROCE ROE Dividend payout Dividend yield
Source: Company , LKP Research

1.69 3.59 13.08 0.41 22.8 146.9 N/A N/A 27.2 12.8 3.5 0.7 11.3 27.4 81.5 18.1 1.08 14.0 12.9 31% 0.9

3.22 5.52 14.40 0.56 40.4 42.2 437.7 90.6 14.3 8.3 3.2 0.5 7.8 30.0 80.0 18.0 1.16 38.0 22.4 17% 1.2

4.41 7.36 18.51 0.69 5.2 22.7 37.1 36.7 10.4 6.2 2.5 0.5 6.2 35.0 80.0 22.0 0.83 43.8 23.9 16% 1.5

5.02 8.54 23.21 0.73 8.9 10.2 14.0 14.0 9.2 5.4 2.0 0.4 5.7

Cash Flow
YE Mar (`mn `mn) `mn PBT Depreciation Interest Chng in working capital Tax paid Other operating activities CF from operations (a) Capital expenditure Chng in investments Other investing activities CF from investing (b) FY10 213 1,367 (65) 870 (294) 481 2,572 (86) 7,549 (9,300) (1,838) 734 724 1,794 (389) (1,238) 891 1,625 FY11 1,784 1,336 (157) (467) (832) 522 2,185 (2,780) 10,090 (7,881) (571) 1,614 0 (3,022) (416) 181 (3,257) (1,642) (326) FY12E 2,974 1,396 (42) (779) (870) 915 3,594 (2,200) 0 40 (2,160) 1,434 0 433 (328) 318 422 1,856 1,530 FY 13E 3,335 1,662 (42) (2,432) (939) 810 2,394 (1,700) 0 42 (1,658) 736 0 1,500 (348) (629) 523 1,258 2,788

40.0 75.0 24.0 0.68 32.4 21.7 15% 1.6

Free cash flow (a+b) Equity raised/(repaid) Inc/dec in borrowings Dividend paid (incl. tax) Other financing activities CF from financing (c) Net chng in cash (a+b+c)

Closing cash & cash equiv. 1,316

LKP Research
ISIEmergingMarketsPDF in-mdidemo from 115.111.95.19 on 2012-04-25 06:16:54 EDT. DownloadPDF. Downloaded by in-mdidemo from 115.111.95.19 at 2012-04-25 06:16:54 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

4

Team LKP
Pratik Doshi S. Ranganathan Ashwin Patil Hardik Mehta Varsha Jhaveri Hitesh Doshi Gurdarshan Singh Bharat Shah Director Head of Research Research Analyst Sales Sales Sales Sales Dealing 98210 47676 98212 22510 98195 78395 98190 66569 93241 47566 93222 45130 93228 61461 98337 97256 6635 1270 6635 1271 6635 1246 6635 1296 6635 1281 6635 1246 6635 1210 [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

LKP Securities Ltd.13th Floor, Raheja Center, Free Press Road, Nariman Point, Mumbai-400 021. Tel -91-22 - 66351234 Fax- 91-22-66351249. www.lkpsec.com
ISIEmergingMarketsPDF in-mdidemo from 115.111.95.19 on 2012-04-25 06:16:54 EDT. DownloadPDF. Downloaded by in-mdidemo from 115.111.95.19 at 2012-04-25 06:16:54 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close