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TVS Motor Q3 preview: Volume decline to dent earnings, margins may improve

TVS Motor Company is scheduled to announce its December 2019 quarter results later in the day. Analysts expect the automaker to post a double-digit decline in revenues as well as profits, largely due to fall in volumes while realization improvement will cushion the blow.

During the quarter under review, TVS Motor Company's volumes declined 17 per cent YoY and 7.3 per cent sequentially. Kotak Securities pegs 26 per cent decline in domestic markets and 23 per cent YoY growth in export markets in volumes. The company's average sell price (ASP) is likely to grow around 5 per cent YoY due to better product-mix with higher sales of premium bikes and exports.

Further, it expects revenues to slip 13 per cent YoY to Rs 4,044.6 crore while net profit is seen dipping 22.2 per cent YoY to Rs 138.7 crore.

Analysts at Prabhudas Lilladher expect TVS Motor to post 11.8 per cent YoY decline in revenue at Rs 4,112.8 crore as compared to Rs 4,664 crore in the year-ago quarter, Profit may slip 6.4 per cent YoY to Rs 1,669 crore from Rs 1,784 crore in Q3FY19. 

According to the brokerage, the decline in volumes will partially be offset by realisation improvement of 6.2 per cent YoY, courtsey price hike for two-wheeler (2W), higher share of three-wheeler (3W) and exports in the product mix.

Reliance Securities pegs TVS Motor's Q3FY20 revenue at Rs 4,064.6 crore, down 12.9 per cent YoY, and profit at Rs 131.2 crore, down 26.5 per cent from the year-ago quarter.

OPERATING PERFORMANCE

Prabhudas Lilladher sees TVS Motor's earnings before interest, tax, depreciation, and ammortisation (Ebitda) at Rs 361.4 crore, down 3.8 per cent YoY. However, margins are likely to tick up as a result of product mix and low raw material cost while negative operating leverage will cap the gains. As such, the brokerage sees Ebitda margin at 8.8 per cent, up from 8.1 per cent YoY but flat sequentially.

Kotak Securities expects the firm to report a higher 11 per cent YoY decline in Ebitda to Rs 335.6 crore, mainly led by negative operating leverage although Ebitda margin may grow by 24 bps YoY to 8.3 per cent.

At the bourses, TVS Motor outperformed the benchmarks by surging 11.52 per cent during the quarter as compared to Sensex's 7.69 per cent gain in the same period.


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