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    Buy TVS Motor, target price Rs 470: Sharekhan

    Synopsis

    With increased kharif sowing and strong rural sentiments, the brokerage expects TVS to reach pre-Covid sales levels faster than anticipated.

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    Sharekhan has given a buy rating to TVS Motor Company with a target price of Rs 470. The share price moved down by -3.79 per cent from its previous close of Rs 400.10. The stock’s last traded price is Rs 384.95.

    According to the brokerage, TVS Motors deriving about 45 per cent of volumes from rural areas and 25 per cent from exports is witnessing faster recovery in volumes with sales reaching 67 per cent of normal levels in June 2020 as compared to 20 per cent in May 2020. With a forecast of a normal monsoon boosting rural sentiments, a record 88 per cent increase in kharif sowing and a better pick-up in export markets which are less impacted by Covid-19, the brokerage expects TVS to reach pre-Covid levels faster than anticipated.

    Investment Rationale


    The brokerage says TVS’ June sales recovered sharply to 67 per cent of normal driven by strong rural sentiments in domestic rural markets. Recovery in exports was a bit higher and already reached 75 per cent of normal. While June sales broadly met estimates, TVS stated it had some supply chain issues (adjusting for which sales would have beat estimates). With increased kharif sowing and strong rural sentiments, the brokerage expects TVS to reach pre-Covid sales levels faster than anticipated.

    Also export volumes are witnessing encouraging recovery. Increased volumes would help margins improve, says the brokerage. Sharekhan has raised its FY21 and FY22 estimates by 4 per cent and 18 per cent respectively. At CMP, the stock is trading at 19.6 times its FY22 core earnings (adjusted for TVS’ credit services), which are lower than its long-term historical average of 22 times. Hence, it retains a buy rating on the stock with a revised target price of Rs 470.

    Key Risks
    : Prolonged Covid-19 infection in India can impact economic growth and consumer sentiments.

    TVS Motor-SharekhanJuly92020


    Financials

    For the quarter ended March 31, 2020, the company reported a consolidated sales of Rs 4104.71 crore, down -13.87 per cent from last quarter sales of Rs 4765.99 crore and down -17.15 per cent from last year's same quarter sales of Rs 4954.65 crore. The company reported net profit after tax of Rs 84.76 crore in the latest quarter.

    Promoter/FII Holdings

    Promoters held 57.39 per cent stake in the company as of March 31, 2020, while FIIs held 11.37 per cent, DIIs 21.01 per cent and public and others 10.04 per cent.
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    1 Comment on this Story

    sandy25 days ago
    good info
    The Economic Times