Buy rating on TVS Motors, target price Rs 172: Motilal Oswal

There a few key takeaways from TVS Motor’s (TVSL) FY14 annual report. Against the backdrop of a low GDP growth and uncertain outlook for monsoon, TVSL expects a modest growth for 2W industry for FY15. A slew of new motorcycles and scooter launches are expected in FY15. The company expects to strengthen its presence in motorcycles and consolidate presence in scooters with new launches. To roll out diesel 3W in FY15. It invested R50 crore and R75 crore in Indonesian operations and captive financing arm, respectively. Largely exited from energy venture for R100 crore in FY14 at a gain of R30 crore. BMW tie-up on track with first joint product to be launched in CY15.

Short-term headwinds notwithstanding, management remains confident of healthy long-term growth prospects for the 2W industry. The company saw a decline in Scooty sales due to market shift towards bigger scooters.

TVSL is well positioned to benefit from the scooterisation wave with its complete scooter portfolio. Over the next 12-18 months, it plans to launch multiple products across segments to reinforce and fill gaps in the portfolio. Over FY14-16E, expect robust 55% EPS CAGR, RoE expansion from 19.8% to 30.8% coupled with significant improvement in balance sheet strength. We maintain a buy rating with a target price of R172 (13x FY16E EPS).