TVS Motor Company Q4FY18E result expectation

Expectations (Standalone) for Q4FY18E*:

• Revenue: Rs3,988cr; up 40% yoy, led by 32% yoy volume growth and 7-8% yoy realization growth. Realization improvement due to better product mix – increasing share of premium motorcycles to the total volume mix and export contribution of 18% to total volumes in Q4FY18 vs. 16% in Q4FY17.
• EBITDA: Rs342cr; up 111% yoy
• EBITDA margin: 8.6%; expansion of 289bps yoy. The margin expansion will be led by lower raw material costs (as % of sales) and steady operating expenses. It is unlikely that exit EBITDA margins will reach the double-digit mark that the management has been guiding for quite a few quarters. However, the overall trajectory remains upward and we could see double digit margins in the ensuing quarters.
• PAT: Rs197cr; up 55% yoy

*Numbers based on consensus estimates

Q3FY18 performance highlights:

• Revenue: Rs3,685cr; up 24% yoy led by 15% yoy volume growth and 7% yoy realization growth. Realization growth during the quarter (7% yoy) was aided by a better product mix. The company sold a higher proportion of scooters (32.5% vs. 31%) and 3Ws (3% vs. 2%) in Q3FY18 compared to Q3FY17.
• EBITDA: Rs287cr; up 31% yoy
• EBITDA margin: 7.8%; expansion of 46bps yoy, due to higher realization, better product mix
• PAT: Rs154cr; up 16% yoy

Remarks:

• While double-digit exit EBITDA margin for Q4FY18 looks unlikely, management commentary on the same will be keenly watched.
• Customer response to Ntorq (scooter) and the new version of Apache (motorcycle) has resulted in better realization for the company.
• Capex guidance for FY19 will be watched for.

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