View Full Version : TVS Srichakra Limited (NSE:TVSSRICHAK) (BSE:509243)

08-14-2015, 06:28 PM
TVS Srichakra Limited is an India-based company engaged in manufacturing and sale of two wheeler, three wheeler, industrial, agricultural and farm tires as well as knobs for direct application. The Company is part TVS Auto Ancillary Group. The Company has its manufacturing facility at Madurai in Tamil Nadu. It is spread over an area of 2.9 lakh square meters. The Company’s product portfolio includes Two and Three-wheeler tires, Industrial pneumatic tires, Farm and implement tires, Skid steer tires, multipurpose tires and Floatation tires. The Company offers its products to vehicle manufacturers and Original Equipment Manufacturers. The Company exports to the United States Europe, South America, Africa and Australia. The Company’s subsidiaries include TVS Srichakra Investments Limited and TVS Europe Distribution Limited.

Official Website: www.tvstyres.com

08-14-2015, 06:33 PM
TVS Srichakra (TVSSL) reported an impressive set of numbers for 1QFY2016. Its top-line for the quarter grew by 11.7% yoy to `504cr, which is above our estimate of `489cr. The raw material cost during the quarter declined by a whopping 1,012bp yoy to 51.2% of sales. Employee cost increased by 232bp yoy to 10.1% of sales while other expenses grew by 19bp yoy to 22.1% of sales. On the back of lower raw material cost, the EBITDA margin expanded by 761bp yoy to 16.5%. Another positive in the result is that the interest expense declined by 48.3% yoy to `5cr. The other income during the quarter increased to `2.2cr against `0.1cr in 1QFY2015. Aided by better operating performance, lower interest expense and higher other income, the net profit surged to `49cr, representing a 183.7% yoy growth. Steady two-wheeler (2W) sales and capacity expansion by top clients to aid top-line growth: TVSSL’s key client Honda Motorcycle & Scooter India (HMSI) continues to be the steady performer in comparison to its peers. HMSI has set out aggressive plans to scale up its business in India with a view to become the largest subsidiary of its parent. HMSI has mentioned that capacity constraints had resulted in the company not being able to grow at a faster pace and has lined up aggressive capex plans for the future. We expect capacity addition by major clients to result in good revenue visibility for TVSSL as it is a market leader in the 2W OEM segment. Additionally, the company (TVSSL) wants to garner a larger share in the high margin replacement market segment where it holds the number three position. Outlook and valuation: We expect TVSSL’s top-line to grow at a CAGR of 12.2% over FY2015-17E to `2,388cr. We expect the operating margin to be at 14.9% in FY2017E on the back of lower rubber prices and improvement in market share in the aftermarket segment. Consequently, the net profit is expected to be at `205cr in FY2017E. At the current market price, the stock is trading at a PE of 10.6x its FY2017E earnings. We have an Accumulate rating on the stock with a revised target price of `3,210 based on a target PE of 12.0x for its FY2017E earnings.

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