Buy TVS Motor Company; target of Rs 422: ICICI Securities

ICICI Securities is bullish on TVS Motor Company has recommended buy rating on the stock with a target price of Rs 422 in its research report dated May 29, 2020.

ICICI Securities research report on TVS Motor Company

TVS Motor Company’s (TVSM) Q4FY20 operating performance was above consensus estimates (Adj. EBITDA margin at 7.5%) driven by tight control on other expenses (down 180bps QoQ). ASP’s rise (13.8%YoY/9.5% QoQ) to ~Rs 55k/unit continues to reflect strong product mix, higher export and BS-VI led price increases. FY20 is a true reflection of benefits of cost saving initiatives filtering through (EBITDA/vehicle expanded ~13% YoY to Rs4.1k) even as operating leverage remained a headwind (~17% YoY volume drop).

Outlook

We expect EBITDA/vehicle to hit Rs5.6k in FY22, believe market share gains are likely via scooter revival in urban areas, rebound of moped due to rural improvement. Stock remains attractive at ~17x FY22 standalone EPS. We maintain BUY.

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