Independent Research Analyst

Mamta Verma

DC India Research

DC India Research LLP (DCIR) is based out of Mumbai, India.

We specialize in providing customized, independent research across listed and unlisted companies in India across equities and credit including sectoral research. Our customers include India focussed PE funds, special situation funds, domestic AMCs, Wealth Advisory& PMS firms, Rating Agencies & Investment Advisors. 

The DCIR board consists of prominent names from the industry as well as CIO’s of Hedge funds.

Equity Bottom-Up

<p style="text-align: justify;"><a href="https://www.smartkarma.com/entities/tvs-motor-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:16123:1">Tvs Motor (TVSL IN)</a>  Q3-FY20 results surprised positively on core EBITDA margins, despite weak operating leverage due to volume weakness, mainly driven by cost reduction efforts. In our opinion, we think double-digit core EBITDAM by FY22 is a strong possibility as volumes recover. The management on the call highlighted that they expect a recovery in domestic 2Ws from 2HFY21 after a slight decline in 1HFY21. Management commentary is quite confident on TVSL’s volumes to outperform over the domestic 2W industry, driven by (a) strong growth in scooters, (b) good response to Radeon/Apache and (c) several new upgrades. We estimate ~8.5% CAGR in 2W volumes over FY20-22, resulting in market share gains. Overall, we estimate revenue CAGR of ~13%, supported by mix improvement and BS6 price hikes. Improving market position, better mix, cost-cutting initiatives and benefits of scale should result in EBITDA margin expansion going forward and hence EBITDA CAGR (@22% over FY20-22) outpacing revenue CAGR. We estimate standalone EPS CAGR of ~30% over FY20-22. Valuations at 27xs/19xs FY21/22E EPS are already reflecting large part of the earnings drivers, leaving limited margin of safety for change in competitive intensity and other business risks. The stock has traded at an average one year forward PE of ~ 24xs. We recommend a BUY on the stock with a fair value of Rs. 555/- valuing average of FY21-22 EPS at 24xs and adding Rs. 50/- for the NBFC subsidiary. Key monitorables include: any changes in GST rates, performance in Nigeria post recent ban and its impact, impact of EVs in scooters segment and cannibalisation of the portfolio, competitive landscape.</p>

Tvs Motor (TVSL IN)  Q3-FY20 results surprised positively on core EBITDA margins, despite weak operating leverage due to volume weakness, mainly driven by cost reduction efforts. In our opinion, we think double-digit core EBITDAM by FY22 is a strong possibility as volumes recover. The management on the call highlighted that they expect a recovery in domestic 2Ws from 2HFY21 after a slight decline in 1HFY21. Management commentary is quite confident on TVSL’s volumes to outperform over the domestic 2W industry, driven by (a) strong growth in scooters, (b) good response to Radeon/Apache and (c) several new upgrades. We estimate ~8.5% CAGR in 2W volumes over FY20-22, resulting in market share gains. Overall, we estimate revenue CAGR of ~13%, supported by mix improvement and BS6 price hikes. Improving market position, better mix, cost-cutting initiatives and benefits of scale should result in EBITDA margin expansion going forward and hence EBITDA CAGR (@22% over FY20-22) outpacing revenue CAGR. We estimate standalone EPS CAGR of ~30% over FY20-22. Valuations at 27xs/19xs FY21/22E EPS are already reflecting large part of the earnings drivers, leaving limited margin of safety for change in competitive intensity and other business risks. The stock has traded at an average one year forward PE of ~ 24xs. We recommend a BUY on the stock with a fair value of Rs. 555/- valuing average of FY21-22 EPS at 24xs and adding Rs. 50/- for the NBFC subsidiary. Key monitorables include: any changes in GST rates, performance in Nigeria post recent ban and its impact, impact of EVs in scooters segment and cannibalisation of the portfolio, competitive landscape.

Tvs M – Q3-Fy20: Buy – Strong Mgt. Guidance on Mkt Share Gains & Resilience in Ebitdam Lends Comfort

TVS Motor

Tvs M – Q3-Fy20: Buy – Strong Mgt. Guidance on Mkt Share Gains & Resilience in Ebitdam Lends Comfort