CMP: Rs. 274.00; Market Cap:
Rs. 13,017.38 Cr; 52 Week High/Low: Rs. 322.25 / Rs. 201.00
Total Shares: 47,50,87,114 shares;
Promoters : 27,26,82,786 shares – 57.40 %; Total Public holding : 20,24,04,328
shares – 42.60 %; Book Value: Rs. 34.63; Face
Value: Rs. 1.00; EPS: Rs. 8.15; Dividend: 190.00 %; P/E: 33.61 times; Ind P/E: 25.01;
EV/EBITDA: 19.51.
Total Debt: Rs. 970.47; Enterprise Value: Rs. 13,985.00 Cr.
TVS MOTORS COMPANY LTD: The Company was
founded on 15th July, 1982 and is based in Tamil Nadu, India. The
company was formerly known as Indian Motorcycle Pvt Ltd and changed its name to
Indo Suzuki Motorcycles Pvt ltd on 12 January 1984 and again changed its name
to TVS Suzuki on 18 August 1986. On
27 September 2000, TVS group bought out the 25.97 % stake from its Japanese
partner Suzuki Motor Corporation for Rs. 9 Cr and dropped the word Suzuki from
its name. The company came with the public offer in 1984 with 59,40,000 equity
shares issued at par and from that 29,70,000 shares were offered to the public.
TVS Motor Company has last declared split in its face value of its shares from
Rs. 10 to Rs. 1 on 17 October 2003 and later company declared bonus in the
ratio of 1:1 on 21 July 2010. TVS Motor Company Limited manufactures
motorcycles, scooters, mopeds, three wheelers and its parts and accessories. TVS
Motor Company Ltd (TVS Motor) is a member of the TVS group, and TVS Motors is
also the largest company of the group in terms of size and turnover. The
Company's products are distributed by network of authorized dealers across
India. The Company has strong distribution network in the two wheeler industry
and it continuously seeks to increase its distribution reach. TVS is the first company in India to introduce 4
stroke scooter and the pioneers of Indo-Japanese motorcycles in India. It is
also the first company to launch India’s first auto clutch motorcycle viz. TVS JIVE. The Company's motorcycles
products include Apache Series RTR, Phoenix 125, StaR City+, TVS JIVE, Sport and Max4R.
Its scooters include Jupiter, Wego,
Scooty Zest 110, Scooty Streak and
Scooty Pep+. Its Mopeds products are TVS XL Super, TVS XL Heavy duty. The
Company's three wheelers include TVS King,
which is a diesel version. The company has four manufacturing plants, three
located in India at Hosur, Tamil Nadu; Mysore, Karnataka, and Nalagarh,
Himachal Pradesh and one in Karawang, Indonesia. The Company's subsidiaries
include Sundaram Auto Components Limited, TVS Housing Limited, PT. TVS Motor
Company Indonesia, TVS Motor Company, TVS Motor (Singapore) Pte Limited and Sundaram
Business Development Consulting (Shanghai) Company Limited. TVS Motors Company Ltd is locally
compared with Scooters India Ltd, Force Motors Ltd, Atul Auto Ltd, Maruti
Suzuki India Ltd, Mahindra & Mahindra Ltd, Tata Motors Ltd, Ashok Leyland
Ltd, Daewoo Motors India Ltd, Eicher Motors Ltd and Globally with Honda Motor
Co. Ltd of Japan, Nissan Motor CO. Ltd of Japan, Toyota Motor Corp of Japan,
Mitsubishi Motors of Japan, Bayerische Motoren Werke AG of Germany,
Harley-Davidson Inc of USA, Yamaha Motor Co of Japan, KTM AG of Germany,
Chongping Kington-Liyang Motorcycle Manufacturing co. Ltd of China, Ducati of
Italy, Kawasaki Motors of Japan, Suzuki Motors of Japan, Nitro Motor Cycle of
Malaysia.
Investment Rationale:
TVS
Group is US$ 7.29 billion group spanned across industries like Automobile,
Aviation, Education, Electronics, Energy, Finance, Housing, Insurance,
Investment, Logistics, Services and textiles. TVS Group has over 90 Companies
under its umbrella. TVS Motor Company Ltd is a member of the TVS group, is the
largest company of the group in terms of size and turnover. The company has four
manufacturing facilities located at Hosur, Mysore, Himachal Pradesh and
Indonesia. The Company's products are distributed by network of authorized
dealers across India. The Company has strong distribution network in the 2W
industry and is continuously making efforts to increase its distribution reach.
The two wheeler industry's growth in India appears to have converged to the
long term trend after three years, growing 9 % in 2014-15. While the first half
of 2014-15 witnessed a growth of 18 %, the second half grew by only 2 %. Hence,
the annual growth rate of 9 % is not a fair reflection. Decline in growth in
second half was more pronounced in rural markets. This is mainly due to a lag
effect of lower agricultural output and impact of unseasonal rains. Scooter as
a category continued to gain share in total two wheeler industry. The category
share of scooters increased from 23 % to 27 % due to changing consumer
preferences and strong urban demand. Scooters segment increased from 36.97 lakh
numbers to 47.00 lakh numbers. The motorcycle segment remained flat at 4 % of
around 129.97 lakh in numbers in 2014-15. The continued traction in urban
demand however enabled the premium segment to increase by 19 % of around 24.23
lakh in numbers in 2014-15. This is in contrast to the lower growth witnessed
in the commuting segment of 1 % growth of 105.35 lakh in numbers in 2014-15.
Mopeds grew marginally by 5 % in 2014-15 compared to a decline of 8 % in
2013-14. The petrol passenger three wheeler industry 3 plus 1 segment increased
by 23 % during 2014-15 to 5.61 lakh units. Domestic sales increased by 51 % due
to new permits released by Maharashtra from 1.04 lakh units in 2013-14 to 1.57
lakh units in 2014-15. Exports increased by 15 % from 3.51 lakh units in 2013-14
to 4.04 lakh units in 2014-15. Revival in economic
activity appears to be marginal and slow paced. With a nominal growth in crop
prices, unseasonal rains, stagnating rural wages and declined rabi output,
weakness in rural economy appears to persist. Increasing probability of El-nino
effect can result in poor spatial and seasonal distribution of rainfall
affecting kharif production. Consequently the growth in two wheeler industry in
2015-16 is expected to be flat at 9 % as in 2014-15. TVS Motor Company
is the third largest two-wheeler manufacturer in India and one among the top
ten in the world, with annual revenue of more than Rs. 10,131 Cr in 2014-15.
The company has a production capacity of 3o lakhs 2 wheelers & 1.2 lakh 3
wheelers a year. TVS plans for new product launches like Victor and new Apache
which are on track for 4QFY16. TVS motors have tied up with BMW which would
give TVS an additional revenue stream in the form of contract manufacturing for
BMW Motorrad. Moreover, it would give an aspirational value to TVS products,
particularly in premium ones. The first product is expected to be launched by
FY17 and which would have investment of 2 Cr Euros over CY13-15 by TVS. BMW has
showcased its concept from TVS alliance in Brazil and have received very good response.
BMW enjoys 14 % market share in >650 cc segments and assuming even 10 %
market share for BMW in global market in 250-650cc segment which are of 10lakh
units market size could contribute around Rs. 142.52 Cr in net profit of the
company. TVS Motor Ltd with its efforts intends to target 15 % market share in
domestic 2W business by FY16 end and 27 % market share in 3W Exports. TVS
Jupiter has shown a strong growth and this led to postponement of new launches.
But plans to launch new Moped in UP and if successful then it would be launched
PAN India in 3 months. Company plans its capex of Rs. 350 Cr in FY16. TVS has current
utilization at 90 % in India and might have to add capacity for Scooters and
Victor/Apache depending on demand going ahead. TVS has made investment of Rs. 26.7
Cr in Indonesian subsidiary and Rs. 25 Cr in TVS motor services and has volume
of 6800 units for 2QFY16. Company exports Bebex/Scubex from Indonesia to
Africa, Latin America, and Middle East etc. This investment in Indonesia will
increase its capacity to 20000 month from 2500 to 3,000 per month production
now. Management targets 10 % EBITDA margin in 3 years, and most of the margin
expansion is expected to come from increased market share and consequent
operating leverage benefits. New launches and BMW tie up with efforts to
increase market share and increasing capacity would drive the topline and TVS
looks best option for two wheelers sector.
Outlook and Valuation:
BMW-TVS-Concept-G-310. |
KEY FINANCIALS | FY14 | FY15 | FY16E | FY17E |
---|---|---|---|---|
SALES (₹ Crs) | 7,961.85 | 10,098.20 | 11,530.00 | 14,520.00 |
NET PROFIT (₹ Cr) | 261.63 | 347.83 | 460.00 | 760.00 |
EPS (₹) | 5.51 | 7.32 | 9.70 | 16.00 |
PE (x) | 43.86 | 32.99 | 31.20 | 19.00 |
P/BV (x) | 8.11 | 6.97 | 7.30 | 5.60 |
EV/EBITDA (x) | 23.35 | 19.45 | 18.70 | 12.10 |
ROE (%) | 18.27 | 21.14 | 25.50 | 33.30 |
ROCE (%) | 33.84 | 30.82 | 24.30 | 32.70 |
*As the author of this blog I disclose that I do not hold TVS MOTORS COMPANY Ltd in my any of the portfolios.
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This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.
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Sounds interesting..8% SL is quite risk aversive... Thanks for the tip, Bhavikk
ReplyDeletecan we say the scooters are back. thanks for the detailed analysis
ReplyDeleteA very good insight into TVS, a company that has stood for trust and honesty over so many years.
ReplyDeleteat Frost and Sullivan, have analysed the two wheeler market and TVS a prominent player then has just seen growth. It did face competition when Honda entered the scooter market but strengthen its share. a strong reason being high localization and backing from a umbrella group of TVS. super analysis as always :)
ReplyDeleteEpic Research suggests essential share trading tips and current market trends for all the traders, they can know investment ideas and make a big profit.
ReplyDelete