Company Detail Report - TVS MOTOR COMPANY LTD...The Company has launched the TVS Apache RTR 160 4V...

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TVS MOTOR COMPANY LTDResult Update (PARENT BASIS): Q3 FY19

CMP: 553.85 JAN 23rd, 2019

Overweight ISIN:INE494B01023

Index DetailsSYNOPSIS

TVS Motors Company is a reputed two and three-wheeler manufacturer, and the flagship company ofthe USD 8.5 Billion TVS Group.

During the quarter, the company achieved a turnoverof Rs. 46639.80 mn as against Rs. 36849.50 mn in Q3FY18, up by 26.57%.

During the quarter, EBIDTA is Rs. 3763.80 mn asagainst Rs. 3049.50 mn in the corresponding period ofthe previous year.

During Q3 FY19, PBT stood at Rs. 2584.50 mn fromRs. 2103.60 mn in Q3 FY18.

During Q3 FY19, Net profit stood at Rs. 1783.90 mnagainst Rs. 1543.50 mn in Q3 FY18, up by 15.57%.

EPS of the company stood at Rs. 3.75 a share duringthe quarter as compared to Rs. 3.25 in thecorresponding period of previous year.

In the nine months ended 31 Dec, 2018, revenue grewby 20.18% to Rs. 138111.50 mn from Rs. 114924.00mn in the nine months ended 31 Dec, 2017.

PAT for 9M FY19 is Rs. 5363.10 mn as against Rs.4969.80 mn registered in 9M FY18, up by 7.91%.

Sales of three-wheelers of the Company grew by 47%from 0.27 lakh units in the third quarter of theprevious year to 0.40 lakh units in the third quarter ofthe current year.

During the quarter ended December 2018, the overalltwo-wheeler sales of the Company including exportsgrew by 18.9% to 9.50 Lakh units from 7.99 Lakhunits in the quarter ended December 2017.

Motorcycle sales grew by 20.3% to 3.78 Lakh units inthe quarter ended December 2018 from 3.14 Lakhunits registered in the quarter ended December 2017.

Net Sales and PAT of the company are expected togrow at a CAGR of 16% and 14% over 2017 to2020E, respectively.

Stock DataSector AutomobileBSE Code 532343Face Value 1.0052wk. High / Low (Rs.) 734.00/478.70Volume (2wk. Avg.) 115000Market Cap (Rs. in mn.) 263134.14

Annual Estimated Results(A*: Actual / E*: Estimated)Years(Rs in mn) FY18A FY19E FY20ENet Sales 154728.80 187083.29 218887.45EBITDA 12739.90 15441.61 17135.29Net Profit 6625.90 7344.06 8379.63EPS 13.95 15.46 17.64P/E 39.71 35.83 31.40

Shareholding Pattern (%)

As on Dec 2018 As on Sep 2018

Promoter 57.40 57.40

Public 42.60 42.60

Others -- --

1 Year Comparative Graph

TVS MOTOR COMPANY LTD S&P BSE SENSEX

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)TVS Motor Company Ltd 553.85 263134.14 14.77 37.49 9.14 330.00Bajaj Auto Ltd 2683.95 776644.60 148.60 18.06 4.07 600.00Hero Moto Corp Ltd 2823.85 563977.50 183.17 15.42 4.79 4750.00Atul Auto Ltd 327.80 7193.00 21.25 15.43 3.28 105.00


QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q3 FY19,

(Rs in mn) Dec-18 Dec-17 % Change

Revenue 46639.80 36849.50 26.57%

Net Profit 1783.90 1543.50 15.57%

EPS 3.75 3.25 15.57%

EBIDTA 3763.80 3049.50 23.42%

The company achieved a turnover of Rs. 46639.80 million for the 3rd quarter of the financial year 2018-19 as against Rs.

36849.50 million in the corresponding quarter of the previous year, up by 26.57%. Net profit stood at Rs. 1783.90 million

against Rs. 1543.50 million in the corresponding quarter ending of previous year. Reported earnings per share of the

company stood at Rs. 3.75 a share during the quarter as against Rs. 3.25 per share over previous year period. Profit before

interest, depreciation and tax is Rs. 3763.80 million as against Rs. 3049.50 million in the corresponding period of the

previous year.

Break up of Expenditure

Break up ofExpenditure

Q3 FY19 Q3 FY18 %CHNG

Cost of MaterialsConsumed 34443.00 24849.20 39%

Purchase of Stock inTrade 603.20 514.10 17%

Employee BenefitExpenses 2366.50 2118.40 12%

Depreciation &amortizationexpense

1012.40 824.20 23%

Other expenses 5169.10 5080.50 2%


SALES UPDATE FOR THE MONTH OF DECEMBER:

Two-Wheeler

Total two-wheelers registered a growth of 4% with sales increasing from 247,591 units in December 2017 to 258,709

units in December 2018.

Domestic two-wheeler sales registered a growth of 1% from 207,739 units in December 2017 to 209,906 units in

December 2018.

Scooter sales of the Company grew by 9% from 83,638 in December 2017 to 91,480 units in December 2018.

Motorcycle sales grew by 13% with sales increasing from 95,246 units in December 2017 to 107,189 units in

December 2018.

Exports

The Company's total exports grew by 26% from 47,818 units registered in the month of December 2017 to 60,262

units in December 2018.

Two-wheeler exports grew by 22% increasing from 39,852 units in December 2017 to 48,803 units in December

2018.

Three-Wheeler

Three-wheeler of the Company grew by 37% increasing from 9,279 units in December 2017 to 12,686 units registered

in December 2018.

THIRD QUARTER SALES PERFORMANCE:

During the quarter ended December 2018, the overall two-wheeler sales of the Company including exports grew by

18.9% to 9.50 Lakh units from 7.99 Lakh units in the quarter ended December 2017.

Motorcycle sales grew by 20.3% to 3.78 Lakh units in the quarter ended December 2018 from 3.14 Lakh units

registered in the quarter ended December 2017.

Scooter sales of the Company grew by 31.7% to 3.54 Lakh units in the quarter ended December 2018 from 2.69 Lakh

units in the quarter ended December 2017.

The total export of the Company grew by 25.8% to 1.77 Lakh units during the quarter ended December 2018 from

1.40 Lakh units in the quarter ended December 2017.

Total three wheelers sales grew by 47.0% to 0.40 Lakh units in the quarter ended December 2018 from 0.27 Lakh

units in the quarter ended December 2017.

Cumulative nine months results

In the nine months ended 31 Dec, 2018, revenue grew by 20.18% to Rs. 138111.50 mn from Rs. 114924.00 mn in the

nine months ended 31 Dec, 2017.


PAT for 9M FY19 is Rs. 5363.10 mn as against Rs. 4969.80 mn registered in 9M FY18, up by 7.91%.

The total two-wheeler sales of the Company for the nine months ended December 2018 grew by 15.3% to 28.92 Lakh

units as against 25.08 Lakh units recorded in the period ended December 2017.

Motorcycle sales grew by 17.4% to 11.84 Lakh units in the period ended December 2018 from 10.09 Lakh units

registered in the period ended December 2017.

Scooter sales grew by 20.5% in the nine months ended December 2018 to 10.30 Lakh units as against 8.55 Lakh units

registered in the nine months ended December 2017.

The total exports of the Company increased to 5.50 Lakh units in the nine months ended December 2018 as against

4.13 Lakh units in the nine months ended December 2017 registering a growth of 33.0%.

Total three-wheeler sales for the nine months ended December 2018 grew by 65.9% to 1.15 Lakh units as against 0.69

Lakh units in the nine months ended December 2017.

New Launches:

TVS Motor Company launched new engine oil, TRU4 KRAAFT, for the Indian market. TRU4 KRAAFT oil, a semi

synthetic engine oil, has been introduced in association with Indian Oil Corporation Limited (IOCL).

TVS Motor Company rolled out the 50,000 unit of the BMW 310cc motorcycle which was was rolled out from the

Hosur plant of the company.

TVS Motor Company launched its super premium offering TVS Apache RR 310, the 125cc connected scooter TVS

NTORQ 125 and the race machine TVS Apache RTR 160 4V for the Peru market.

The Company has launched the TVS Apache RTR 160 4V in Bangladesh. The TVS Apache RTR 160 4V will be the

flagship offering of the brand in the country.

COMPANY PROFILE

TVS Motors Company is a reputed two and three-wheeler manufacturer, and the flagship company of the USD 8.5 Billion

TVS Group. The company believes in Championing Progress through Mobility. Rooted in its 100-year legacy of Trust,

Value, and Passion for Customers and Exactness, the company takes pride in making internationally aspirational products

of the highest quality through innovative and sustainable processes. The company endeavour to deliver the most superior

customer experience at all its touch points across 60 countries. TVS Motor Company is the only two-wheeler company to

have received the prestigious Deming Prize. The company products lead in their respective categories in the J.D. Power

IQS and APEAL surveys for the past four years. The company has been ranked No. 1 Company in the J.D. Power

Customer Service Satisfaction Survey for consecutive three years.


FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as of March 31, 2017 -2020E

FY17A FY18A FY19E FY20E

ASSETS1) Non-Current Assets

a) Property, plant and equipment 19306.40 23154.69 26627.89 29290.68b) Capital Work in Progress 622.80 917.40 1174.27 1467.84c) Other Intangible Assets 532.30 564.10 592.31 621.92d) Intangible Assets under Development 0.00 393.90 413.60 430.14e) Financial Assets

i) Investments 15879.00 20353.80 24424.56 28820.98ii) Others 1.20 1.30 1.38 1.46

f) Non-Current Tax Assets 246.70 230.20 218.69 209.94g) Other Non – Current Assets 589.40 398.30 326.61 277.62Sub - Total Non- Current Assets 37177.80 46013.69 53779.30 61120.58

2) Current Assetsa) Inventories 9669.50 9643.90 10222.53 10733.66b) Financial Assets

i) Trade receivables 7237.70 9683.70 12104.63 14525.55ii) Cash and Cash equivalents 43.70 64.90 83.07 103.84iii) Bank Balances other than 41.40 44.10 46.31 49.08iv) Others 135.10 142.30 150.84 158.38

c) Current Tax Assets 18.80 604.30 773.50 966.88d) Other Current Assets 4722.70 5597.90 6437.59 7210.10Sub - Total Current Assets 21868.90 25781.10 29818.46 33747.49

Total Assets (1+2) 59046.70 71794.79 83597.76 94868.07EQUITY AND LIABILITIES1) EQUITY

a) Equity Share Capital 475.10 475.10 475.10 475.10b) Other Equity 23608.20 28329.10 35673.16 44052.79

Total Equity 24083.30 28804.20 36148.26 44527.892) Non Current Liabilities

a) Financial Liabilitiesi) Borrowings 4687.60 3176.20 2604.48 2213.81

b) Provisions 508.00 537.60 564.48 587.06c) Deferred Tax liabilities (Net) 1257.00 1481.70 1703.95 1925.46Sub - Total Non Current liabilities 6452.60 5195.50 4872.91 4726.33

3) Current Liabilitiesa) Financial Liabilities

i) Borrowings 6163.80 7193.50 7912.85 8545.88ii) Trade Payables 18593.60 25179.90 28423.36 30017.14iii) Other financial liabilities 796.10 2104.00 2630.00 3156.00

b) Provisions 628.70 620.20 589.19 571.51c) Other Current Liabilities 2328.60 2697.49 3021.19 3323.31Sub - Total Current Liabilities 28510.80 37795.09 42576.59 45613.84

Total Equity and Liabilities (1+2+3) 59046.70 71794.79 83597.76 94868.07


Annual Profit & Loss Statement for the period of 2017 to 2020E

Value(Rs.in.mn) FY17A FY18A FY19E FY20E

Description 12m 12m 12m 12mNet Sales 131900.60 154728.80 187083.29 218887.45Other Income 1733.70 1447.80 194.90 171.51Total Income 133634.30 156176.60 187278.19 219058.96

Expenditure -123329.90 -143436.70 -171836.58 -201923.67

Operating Profit 10304.40 12739.90 15441.61 17135.29Interest -439.50 -566.20 -742.29 -853.63

Gross profit 9864.90 12173.70 14699.32 16281.66Depreciation -2878.10 -3387.30 -4075.44 -4686.76

Profit Before Tax 6986.80 8786.40 10623.88 11594.90Tax -1406.00 -2160.50 -3279.83 -3215.27

Net Profit 5580.80 6625.90 7344.06 8379.63Equity capital 475.10 475.10 475.10 475.10Reserves 23608.20 28329.10 35673.16 44052.79

Face value 1.00 1.00 1.00 1.00

EPS 11.75 13.95 15.46 17.64

Quarterly Profit & Loss Statement for the period of 30th June, 2018 to 31st Mar, 2019E

Value(Rs.in.mn) 30-June-18 30-Sep-18 31-Dec-18 31-Mar-19E

Description 3m 3m 3m 3mNet sales 41537.00 49934.70 46639.80 48971.79

Other income 173.20 7.40 6.50 7.80

Total Income 41710.20 49942.10 46646.30 48979.59

Expenditure -38472.40 -45652.90 -42882.50 -44828.78

Operating profit 3237.80 4289.20 3763.80 4150.81

Interest -180.20 -211.60 -166.90 -183.59

Gross profit 3057.60 4077.60 3596.90 3967.22

Depreciation -933.40 -1016.00 -1012.40 -1113.64

Profit Before Tax 2124.20 3061.60 2584.50 2853.58

Tax -658.10 -948.50 -800.60 -872.63

Net Profit 1466.10 2113.10 1783.90 1980.96

Equity capital 475.10 475.10 475.10 475.10

Face value 1.00 1.00 1.00 1.00

EPS 3.09 4.45 3.75 4.17


Ratio Analysis

Particulars FY17A FY18A FY19E FY20E

EPS (Rs.) 11.75 13.95 15.46 17.64EBITDA Margin (%) 7.81% 8.23% 8.25% 7.83%PBT Margin (%) 5.30% 5.68% 5.68% 5.30%PAT Margin (%) 4.23% 4.28% 3.93% 3.83%P/E Ratio (x) 47.15 39.71 35.83 31.40ROE (%) 23.17% 23.00% 20.32% 18.82%ROCE (%) 21.26% 23.87% 24.36% 22.52%Debt Equity Ratio 0.45 0.36 0.29 0.24EV/EBITDA (x) 26.58 21.46 17.71 15.98Book Value (Rs.) 50.69 60.63 76.09 93.72P/BV 10.93 9.14 7.28 5.91

Charts


OUTLOOK AND CONCLUSION

At the current market price of Rs. 553.85, the stock P/E ratio is at 35.83 x FY19E and 31.40 x FY20E respectively.

Earning per share (EPS) of the company for the earnings for FY19E and FY20E is seen at Rs. 15.46 and Rs. 17.64

respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 14% over 2017 to 2020E,

respectively.

On the basis of EV/EBITDA, the stock trades at 17.71 x for FY19E and 15.98 x for FY20E.

Price to Book Value of the stock is expected to be at 7.28 x and 5.91 x for FY19E and FY20E respectively.

Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

Two-Wheeler:

In the domestic market, two-wheeler industry sales grew from 176 lakh units in 2016-17 to 202 lakh units in 2017-18,

registering a growth of 15% over last year. The first half of the year saw a growth of 10% led by re-stocking required due

to BSIII to BSIV transition.

Scooter as a category continued to gain category share in total two-wheeler industry. Scooters grew at 20% (56 lakh units

to 67 lakh units) led by urban demand and the category share increased from 32% in 2016-17 to 33% in year 2017-18.

The motorcycle category grew at 14% (126 lakh units). Within motorcycles, continued traction in urban demand enabled

the premium segment to grow by 11% (from 17.1 lakh units in 2016-17 to 18.9 lakh units in 2017-18). Commuting

segment also grew by 15% (from 84 lakh units in 2016-17 to 97 lakh units in 2017-18) compared to a flat growth in past 5

years. This trend change in commuter segment was triggered by revival of rural demand.


Crude oil prices recovered steadily during 2017-18 and drove economic recovery in the international markets. Currencies

stabilized and foreign exchange availability improved in affected countries of Africa, leading to recovery of the exports

industry in 2017-18 from a low base in 2016-17. Bangladesh, Mexico, Argentina, Philippines and West Africa saw an

increase in demand. Consequently, exports of two-wheeler from India grew by 20% during 2017-18.

Three-wheeler

Overall three-wheeler small passenger industry (3 plus 1 segment) grew by 39% in 2017-18 (from 4.58 lakh units in 2016-

17 to 6.35 lakh units in 2017-18). Domestic industry grew by 41% and exports from India grew by 37% over 2016-17.

Growth in domestic passenger market was largely driven by significant growth in Maharashtra State due to opening of

permits. Export market growth was a result of market recovery in Nigeria and Egypt and expansion of some new markets.

Business Outlook and Overview

Economic activity is expected to improve in 2018-19, benefiting from improved macro-economic environment in both

domestic and global markets.

In India, focus on agriculture and rural development rolled out in the recent union budget, supported by possibility of a

normal monsoon, is expected to positively influence demand from rural markets. Improving credit growth supported by

bank re-capitalization, along with continued government focus on infrastructure is expected to drive growth.

Crude prices have been rising over last one year and this trend is expected to continue in 2018. On one hand, this trend

will continue to aid export market growth, however on the other hand, rising commodity prices will put cost pressures in

the year 2018-19.

Consequently, the growth in two-wheeler industry during 2018-19 is expected to be around 8-10% over 2017-18.


Disclosure Section

The information and opinions in Firstcall Research was prepared by our analysts and it does not constitute an offer orsolicitation for the purchase or sale of any financial instrument including any companies scrips or this is not an officialconfirmation of any transaction. The information contained herein is from publicly available secondary sources and dataor other secondary sources believed to be reliable but we do not represent that it is accurate or complete and it should notbe relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damagethat may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/or its affiliates and/or employees will not be liable for the recipients’ investment decision based on this document.

Analyst Certification

The following analysts hereby state that their views about the companies and sectors are on best effort basis to the best oftheir knowledge. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Theanalyst qualifications, sectors covered and their exposure if any are tabulated hereunder:

Name of the Analyst Qualifications SectorsCovered

Exposure/Interest tocompany/sector UnderCoverage in the CurrentReport

Dr.C.V.S.L. Kameswari M.Sc, PGDCA,M.B.A,Ph.D (Finance)

Pharma &Diversified

No Interest/ Exposure

U. Janaki Rao M.B.A CapitalGoods


B. Anil Kumar M.B.A Auto, IT &FMCG


V. Harini Priya M.B.A Diversified No Interest/ Exposure

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Analyst Stock Weights

Overweight (O): The stock's total return is expected to exceed the average total return of the analyst's industry (orindustry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

Equal-weight (E): The stock's total return is expected to be in line with the average total return of the analyst's industry(or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

No-weight (NR): Currently the analyst does not have adequate conviction about the stock's total return relative to theaverage total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next12-18 months.

Underweight (U): The stock's total return is expected to be below the average total return of the analyst's industry (orindustry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

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Company Detail Report - TVS MOTOR COMPANY LTD...The Company has launched the TVS Apache RTR 160 4V...

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