Buy TVS Motors with a Target Price of 295

TVS Motors was a strong performer in yesterday’s trade, rising by 4% on above average volumes. 

The company’s 4Q result was ahead of our estimates, with revenues growing by 14% yoy

backed by 7% yoy growth in volumes and realizations improving by 6% yoy. 

Gross margins marked a solid improvement of 129bps qoq as it benefited from benign commodity prices, favorable currency and better mix. Adj. EBITDA margin stood at 6.6% in-line with our estimate.  Furthermore, the management has guided of gaining 1.5% pt share in the domestic market and growth in exports by 30% in FY16E. 

We expect the company to post the fastest earnings growth amongst the listed two-wheeler players at 50% CAGR until FY17E. We gain confidence from the success of its recent offerings & strong new product pipeline. 

We expect TVS to post a 12% CAGR in its domestic two-wheeler volumes and 22% CAGR in exports primarily driven by market share gains. We reiterate a BUY on the stock with a Target Price of Rs.295.