TVS Motors (formerly TVS Suzuki) has reported yet another stellar performance for 1QFY03. Aided by the over-whelming success of its newly introduced model 'Victor', renewed demand for 'Max 100' and stable demand for 'Fiero', the two-wheeler major has managed to double its profits in the same period.
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Sales growth at 55% is primarily led by an impressive performance of the new model, which has seen atleast a 35% growth in YoY demand in the last quarter. Volume growth is also estimated to have aided by the low-end model 'Max 100', which has been priced at Rs 30,000 level in competition with Hero Honda's 'Dawn' and Bajaj's 'Boxer'. Overall motorcycle realisations have also improved on account of better product mix and improved contribution from higher end models. However, ungeared scooter and moped sales have remained depressed in the current fiscal.
Operating margins have shot up sharply on the back of lower raw material costs and improved capacity utilisation. Other income is also higher on account of higher cash flow. Despite higher depreciation charges (on account of new capacities) and tax outflow, net profit has more than doubled in 1QFY03. This is a commendable performance and we expect the company to post similar performances in the next two quarters.
The stock currently trades at 455 implying a P/E multiple of 9.8x annualised 1QFY03 earnings. On FY03E earnings estimate, P/E multiple works out to 13 times, which is comparatively on the higher side on peer valuation basis.
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