South India based TVS Motor has started to invoice the 110cc commuter bike Jive. Given the positive expert reviews, and expectations of national ramp up in less than 3 months, we raise motorcycle growth assumptions to 25% in FY11 (earlier 15%). This would imply above industry average growth rate (estimated ~15%), likely given the company’s absence so far in the mid-priced commuter category i.e. ~55% of bike market.
Export sales (~11% of aggregate two wheeler sales) declined 28% YTD to ~93,000 units, due to recessionary conditions in key destinations, which led to de-stocking.
TVS Motor continues to perform strongly in major operating segments – mopeds (YTD up 30%), scooters (up 15%), and three wheelers. While the mopeds business continues to remain a cash cow with limited competition.
Financials:
The company is expected to report an EPS of Rs 1.13 and Rs 7.30 for FY10 and FY11 respectively. With revised profit forecasts driven by increased volume expectations in domestic motorcycles, and two wheeler exports, BOFA-Merrill has revised the target price to Rs 89.