Investor's Eye: Update - TVS Motor Company; Mutual Gains - Debt Mutual Fund Picks

 

Investor's Eye [June 19, 2014]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE     TVS Motor Company Recommendation: Buy Price target: Rs175 Current market price: Rs144   Annual report review; maintain Buy with a revised price target of Rs175   Key points  TVS Motor Company (TVS)'s annual report for FY2014 highlights the category shift in the two-wheeler industry from motorcycles to scooters. The report states that with more male buyers coming in the scooter market, there is a preference for larger scooters. TVS witnessed a fall in demand for its Scooty range and addressed the gap in its offerings by launching the Jupiter. The TVS management is looking to leverage on a complete scooter portfolio in FY2015. It also expects motorcycle volumes, which were lacklustre in FY2014, to pick up in FY2015 aided especially by the launch of the TVS StaR City +. The momentum in three-wheeler exports is expected to continue and the company's domestic three-wheeler volumes are expected to rise with the launch of the diesel variant. Since our initiation on TVS (on May 2, 2013) the stock has delivered an impressive return of 55%. Our positive stance on the company was due to its strong product offering in the scooter segment and an expectation of margin improvement going forward. We remain positive on the stock and expect the company to deliver earnings CAGR of 28% over FY2014-17. We are taking a long-term view on the stock and retaining a Buy recommendation on it with an 18-month revised price target of Rs175 (vs Rs142 earlier) based on 15x FY2017E earnings. Risk to our rating: TVS' Indonesian subsidiary continues to make losses. The performance of the Indonesian subsidiary remains an overhang on the consolidated performance and balance sheet of the company.   MUTUAL GAINS   Debt Mutual Fund Picks   Bond / Debt market round up Bond yields fell 19 bps in May on expectations that a stable Government would come to power and work towards controlling fiscal deficit of the country. Sentiments improved as institutional buyers like insurance companies and pension funds continued with their buying activities in the fixed income space. Strength in domestic equity markets provided additional support. Market sentiments improved as the results of general elections came along expected lines. Bond yields fell by as much as 22 bps between May 20 and May 23 on reports that the Finance Ministry was working on a proposal for the new Government to control the fiscal deficit in its first Union Budget. However, gains were capped after Consumer Price Index-based inflation rose to a three-month high in April, which dampened sentiments to some extent. Bond markets witnessed more pressure due to profit booking and announcement of a new 14-year bond, which resulted in lower demand for instruments of similar tenure The 10-year benchmark bond yield closed down 19 bps at 8.64% compared to the previous month's close of 8.83% after moving in the range of 8.62% to 8.88%. Bond yields even fell to 8.62% in intra-day trading on May 23.   Bond / Debt Outlook Market participants would also look forward to the policies being adopted by the new Government.  The movement of the rupee against the dollar and the activities of foreign investors will also remain in focus. Next month, the RBI will conduct the auction of 91-days, 182-days and 364-days Government of India Treasury Bills for an aggregate amount of Rs56,000 crore. The RBI will also conduct the auction of dated securities for an aggregate amount of Rs46,000 crore.   Click here to read report: Investor's Eye     Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,  The Sharekhan Research Team

 

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