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TVS Motor Q4 preview: Profit may halve, revenue seen declining over 20%

At the bourses, TVS Motor tumbled 36.5 per cent in Q4FY20
TVS Motor Company is scheduled to announce their March quarter results for 2019-20 (Q4FY20) on Thursday. Analysts expect the company's Q4 profit to halve while revenues is seen falling over 20 per cent, led by 30 per cent decline in volumes for the quarter. According to the monthly sales update, TVS Motors sold 6.32 lakh units during the quarter. Sales in domestic markets dipped 41 per cent on a year-on-year (YoY) basis although exports registered a 14 per cent YoY growth.

Analysts at Kotak Securities expect TVS Motor's revenues to decline by 28 per cent YoY to Rs 3,150 crore and profit after tax (PAT) is seen sliding 59 per cent on a YoY basis to Rs 54.9 crore. In comparison, the company had reported revenue of Rs 4,383 crore and profit of Rs 133.8 crore during Q4FY19.

Axis Capital sees a 23 per cent YoY decline in revenues to Rs 3,370 crore and a 50.8 per cent fall in net profit to Rs 70 crore. The brokerage is penciling in around 10 per cent YoY increase in average selling price (ASPs) due to price increases and better mix (higher share of exports).

Dolat Capital expects TVS Motor's revenue to de- grow by 27 per cent YoY to Rs 3,214.2 crore and profit to slide 52.4 per cent on a YoY basis to Rs 63.8 crore. "The fall in volume is likely to be offset by 5 per cent increase in realization," the brokerage said.

Operating performance

Kotak Securities sees a 31 per cent YoY decline in the company's earnings before interest, tax, depreciation, and ammortisation (EBITDA) to Rs 212.2 crore, a 31.1 per cent YoY decline as compared to Rs 212.2 crore reported in the corresponding quarter last year. The brokerage attributes the decline in Ebitda to negative operating leverage. Ebitda margin is seen contracting 30 bps to 6.7 per cent.

Analysts at Axis Capital also expects TVS Motor's margin to contract 20 bps YoY to 6.8 per cent, as benefits from gross margin expansion ( around 330 bps YoY) on lower commodity costs and better mix (higher share of exports) is likely to be more than offset by higher employee costs and operating deleverage. On a sequential basis, the brokerage is building in 100 bps contraction in gross margin and similar impact due to negative operating leverage. Ebitda is seen falling 25 per cent to Rs 230 crore from Rs 310 crore in the year-ago quarter.

In a note, Motilal Oswal said, "TVS Motor's dominant market share is moderating from FY19 levels. And although export growth continues to be good for both 2Ws and 3Ws, operating deleverage is likely to hurt the company's margins on a sequential basis." The brokerage cut TVS Motor's FY21 earnings per share (EPS) estimate by 3.8 per cent "to reflect the Covid-19 impact and a weak INR" and remains 'neutral' on the stock.

Stock's performance

At the bourses, TVS Motor tumbled 36.5 per cent in Q4FY20 as compared to Nifty's 29.4 per cent fall in the same period, as per ACE Equity data. Meanwhile, Nifty Auto index declined 42.3 per cent.



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