TVS –Neutral- Angel Securities
TVS Motor plans to invest Rs200 crore by April 2011 to increase its two-wheeler production capacity to 28 lakh units from the present 21 lakh units. With the company operating at high utilisation levels, capacity expansion is being carried out to meet the surge in demand in the two-wheeler space.
Moreover, demand for TVS Jive and TVS Wego continues to remain robust, which has enabled the company to ramp up its production. We expect overall two-wheeler demand to increase at a 12% CAGR over FY2010-12E. We estimate TVS Motor to post a 23% CAGR in its top line and around 64% CAGR in net profit over FY2010-12E, aided by around 16% CAGR in volume and improving operating performance due to change in product mix and better operating leverage.
At the CMP of Rs141, TVS Motor is trading at 19.6x FY2011E and 14.4x FY2012E earnings. We believe the recent run-up in stock price factors in the higher volume and earnings growth expected over FY2010-12E. We continue to maintain our NEUTRAL rating on the stock.
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