Even on a low base, TVS Motor’s revenues for the June quarter were up just a shade over 7 per cent year-on-year to Rs 976 crore, driven by a 5 per cent increase in volumes. That’s probably because it was mainly scooters that drove up sales. On the back of lower raw material prices, the company, however, posted its highest Ebitda (earnings before interest, tax, depreciation and amortisation) of 5.3 per cent in almost three years.
Unless the cost of inputs remains stable, which seems unlikely, the company is unlikely to be able to sustain margins at the current level. Of course, a sharp increase in sales of motorcycles could help but despite a couple of new launches — variants of Apache and Flame — sales of motorcycles remain muted. In the current year so far, they are down around 10 per cent. Besides, the ramp-up in volumes for three-wheelers has been somewhat disappointing though the TVS Scooty Streak has done well. TVS is expected to post revenues of around Rs 4,100 crore this year while net profit should come in at around Rs 65 crore. At the current price of Rs 57, the stock trades at a multiple of close to 21 times estimated 2009-10 earnings and is expensive.
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