TVS Motor: Benefit of two major motorcycle launches not priced in

Benefit of two major motorcycle launches not priced in

Improved industry outlook and recent launch success drive upgrades

-Despite a sharp run-up, the current price level ignores the benefits of two major motorcycle launches over FY14-16E.

– Management has guided 25% volume growth (v/s our growth estimate of 22.5% for FY15), with share gain of 250bp to 14.5% in FY15 driven by a) recent success of Jupiter and b) new launches.

– Improving capacity utilization and better mix to drive margin expansion to 7.9% in FY16E v/s 6% in FY14 (6.9% in 4QFY14).

– Upgrade FY15E/16E EPS by 18.2%/26.5% to factor a) 2W industry recovery gathering pace, b) strong response to recent launches and c) consequent margin expansion to 7.9% in FY16E from 6% in FY14 (6.9% in 4QFY14).

– Over FY14-16E, expect robust 55% EPS CAGR, RoE expansion from 19.8% to 30.8% coupled with significant improvement in balance sheet strength.

– Maintain Buy with a revised target price of INR172 (13x FY16E EPS).

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