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TVS Motor: Another great quarter - Views on News from Equitymaster
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TVS Motor: Another great quarter
Oct 21, 2010

TVS Motor announced its results for the quarter ended September 2010. The company’s revenues grew by 43% YoY, while profits grew by 123% YoY. Here is our analysis of the results.

Performance summary
  • Revenues increase by 43% YoY during the quarter, 42% YoY during 1HFY11. Total two-wheeler volumes stand at about 517,000 units, which is higher by about 32% YoY.
  • Operating margins expand by 0.7% YoY on the back of lower other expenses (as a percentage of sales).
  • Profits increase by 123% YoY on the back of a strong operating performance, coupled with lower interest expenses as well as a marginal increase in depreciation/ amortization costs.
  • Revenues and profits increase by 42% YoY and 123% YoY respectively during 1HFY11.


(Rs m) 2QFY10 2QFY11 Change 1HFY10 1HFY11 Change
Net sales 11,299 16,162 43.0% 21,186 30,092 42.0%
Expenditure 10,519 14,934 42.0% 19,629 27,827 41.8%
Operating profit (EBDITA) 780     1,228 57.4%     1,556     2,265 45.5%
EBDITA margin (%) 6.9% 7.6%   7.3% 7.5%  
Other income           25           25 0.0%           25           67 174.0%
Interest expense/(income) 153 142 -7.2% 325 312 -3.9%
Depreciation/ Amortisation 410 433 5.5% 815 838 2.9%
Extraordinary items            -              -                -              -    
Profit before tax         241         678 180.7%         442     1,182 167.6%
Tax            (4) 130             15 231 1428.5%
Profit after tax/(loss)         246         548 123.1%         427         952 123.0%
Net profit margin (%) 2.2% 3.4%   2.0% 3.2%  
No. of shares (m)           237.5     475.1  
Diluted earnings per share (Rs)*                  3.9  
Price to earnings ratio (x)*                19.1  
*On trailing 12-month earnings, adjusted for extraordinary items

What has driven performance in 2QFY11?
  • TVS reported a revenues growth of 43% YoY on the back of a 32% YoY rise in total two-wheeler sales. Total two-wheeler sales stood at about 517,000 units as against 391,000 units during the quarter ended September 2009. While this may indicate a significant jump in realisations, it may be noted that the company saw a strong a three-fold rise in three-wheelers as well. The company sold 9,826 three wheelers as against 3,259 units last year.

    Motorcycles sales volumes formed nearly 41% of the total volumes (same as last year), and grew by 35% YoY. Sales of scooters on the other hand, grew at a faster pace of 45% YoY and contributed to nearly 24% of total sales volumes during the quarter (22% during 2QFY10). Total export volumes increased by 69% YoY and stood at about 59,000 units.

    Cost break up...
    (Rs m) 2QFY10 2QFY11 Change
    Raw materials 8,006 11,716 46.3%
    % sales 70.9% 72.5%  
    Staff cost 585 847 44.7%
    % sales 5.2% 5.2%  
    Other expenditure 1,928 2,371 23.0%
    % sales 17.1% 14.7%  

  • TVS' operating profits increased by 57% YoY, a faster rise as compared to the increase in revenues. In the process, the company's margins expanded to 7.6% during the quarter as against 6.9% last year. The key reason for the same was lower other expenses. The company's major expense head, raw material/ purchases, increased by 46% YoY in absolute terms and stood at 72.5% of the company's revenues for the quarter as compared to 70.9% last year.

  • TVS' net profits rose by 123% YoY, a much sharper rise as compared to the increase in operating profits. This was on account of lower interest expense and a marginal rise in depreciation and amortisation charges. The growth in the bottomline would have been higher, had it not been for the higher tax outgo.

What to expect?
At the current price of Rs 75, the stock trades at a multiple of 19 times and 9 times our estimated FY13 earnings per share and cash flow per share respectively (ResearchPro subscribers, kindly click here). The company’s performance during the first half of the year has been way above our estimates, even more so in terms of profitability. As such, we will have to revise our future estimates, for which we will come out with a report soon.

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