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TVS Motor: A surge in volumes - Views on News from Equitymaster
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TVS Motor: A surge in volumes
Feb 11, 2015

TVS Motor announced the third quarter results of financial year 2014-2015 (3QFY15). The company reported a 29% YoY and 31% YoY growth in revenues and net profits respectively. Here is our analysis of the results.

Performance summary
  • Revenues grow by 29% YoY during 3QFY15, while volumes are up 23% YoY.
  • Operating margins remain stable at 6% resulting in the 30% YoY growth in operating profits.
  • Net profits grow by 31% YoY in tandem with the growth in operating profits.

Consolidated financial snapshot
(Rs m) 3QFY14 3QFY15 Change 9mFY14 9mFY15 Change
Net sales 20,576 26,529 28.9% 58,062 76,414 31.6%
Expenditure 19,342 24,927 28.9% 54,667 71,873 31.5%
Operating profit (EBDITA) 1,234 1,602 29.8% 3,394 4,541 33.8%
EBDITA margin (%) 6.0% 6.0%   5.8% 5.9%  
Other income 78 59 -24.4% 236 234 -0.8%
Interest expense/(income) 53 53 -0.6% 171 147 -13.9%
Depreciation/ Amortisation 327 371 13.5% 956 1,073 12.2%
Profit before tax 932 1,237 32.8% 2,504 3,555 42.0%
Exceptional items - -   303 -  
Tax 244 335 37.5% 712 982 38.0%
Profit after tax/(loss) 688 902 31.1% 2,095 2,573 22.8%
Net profit margin (%) 3.3% 3.4%   3.6% 3.4%  
No. of shares (m)       475.1 475.1  
Diluted earnings per share (Rs)**         6.4  
Price to earnings ratio (x)*         47.0  
(* on trailing twelve months earnings)
(**excluding extraordinary items)

What has driven performance in 3QFY15?
  • TVS' revenues grew by 29% YoY led by the 23% YoY growth in volumes. Volume growth was strong in both the domestic and export markets. As far as the segments are concerned, total two-wheeler volumes grew by 22% YoY. In this, volumes of scooters grew by a robust 51% YoY, while motorcycle volumes managed to grow by a decent 20% YoY. Three wheelers also did well during the quarter with volumes up by 36% YoY.

  • TVS' operating profits grew by 30% YoY during the quarter, as operating margins remained stable at 6%. Higher raw material costs were offset by lower staff costs and other expenditure (as percentage of sales).

  • Net profits grew by 31% YoY in tandem with the growth in operating profits.
What to expect?
At the current price of Rs 303, the stock trades at a multiple of 27.3 times our estimated FY17 cash flow per share. Going forward, the company intends to focus on new products across segments and is also looking to improve the product mix with a view to increase realisations and profitability. Earlier launches such as the scooter TVS Jupiter and TVS Star Scooty continue to do well. The company also has some product launches lined up in the motorcycle space in FY16. However, the stock price has run up considerably and in light of valuations being on the higher side, our view is that investors not buy the stock at current levels.

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