TVS Motor’s 1QFY15 performance was below estimate, with EBITDA margin at 5.7% (v/s est. of 6.8%), resulting in PAT growth of 39% YoY to INR723m (est. INR953m). Motilal Oswal maintain FY16E estimates, buy.

1. 24 July 2014
1QFY15 Results Update | Sector: Automobiles
TVS Motor Company
Jinesh Gandhi (Jinesh@MotilalOswal.com); +91 22 3982 5416
Chirag Jain (Chirag.Jain@MotilalOswal.com); +91 22 3982 5418
BSE SENSEX S&P CNX
CMP: INR159 TP: INR205 Buy26,272 7,831
Bloomberg TVSL IN
Equity Shares (m) 475.1
M.Cap. (INR b) / (USD b) 75.4/1.3
52-Week Range (INR) 179/28
1, 6, 12 Rel. Per (%) 8/110/371
Financials & Valuation (INR Million)
Y/E March 2015E 2016E 2017E
Net Sales 104,923 130,580 149,386
EBITDA 7,120 10,252 12,326
Adj PAT 4,179 6,509 7,983
EPS (INR) 8.8 13.7 16.8
Gr. (%) 60.3 55.8 22.6
BV/Sh.(INR) 36.5 47.5 61.4
RoE (%) 26.5 32.6 30.8
RoCE (%) 29.8 38.0 37.7
P/E (x) 18.0 11.6 9.4
P/BV (X) 4.4 3.3 2.6
Business outlook strong; new launch impacts margins
TVS Motor’s (TVSL) 1QFY15 performance was below estimate, with EBITDA margin
at 5.7% (v/s est. of 6.8%), resulting in PAT growth of 39% YoY to INR723m (est.
INR953m).
Key reasons for margin disappointment in our view: a) aggressive market entry
pricing for Star City Plus to build motorcycle franchise (similar strategy adopted with
Jupiter for scooters), b) write-off of new launch expenses on tools, dies etc and c)
full quarter impact of excise duty cut extension (Himachal plant), and d) sharp drop
in volume share of mopeds to 31% (v/s 45% in 4QFY14).
Earnings call highlights: a) TVSL expects 2W industry growth of 10% for FY15, with
company outperforming led by new launches, b) recently-launched Star City Plus has
received good response, c) scooter portfolio continues to perform strongly, d)
Apache witnesses strong demand pull, e) mopeds to recover with 5% growth (-8%
in FY14), f) 3Ws to grow 40-45% driven by exports, g) double digit margin guidance
over next two years on track, h) two new motorcycle launches (commuter,
premium), i) Indonesia operations improving with ramp-up in exports.
Downgrade FY15E EPS by 12.9%; maintain FY16E estimates; Buy
 We downgrade FY15E EPS by 12.9% as we cut our margin estimates to 6.8% (v/s
7.4% earlier) on a) aggressive pricing strategy for new motorcycle launches, b)
factoring excise duty cut impact till December 2014. We maintain FY16E
estimates.
 Operating leverage, improved mix and expected improvement in motorcycle
franchise should drive margin expansion from 6.8% in FY15E to 7.9% in FY16E.
 Expect EPS CAGR of 58%, with RoE improving from 19.7% in FY14 to 32.6% in
FY16E. We expect TVSL to be net cash by FY16E, driven by strong FCF.
 TVSL trades at 18x/11.6x FY15E/16E EPS of INR8.8/13.7 respectively. Maintain
Buy with a target price of INR205 (15x S/A FY16E EPS).
Investors are advised to refer through disclosures made at the end of the Research Report.

2. 24 July 2014 2
TVS Motor Company
Robust growth across portfolio drives 31% revenue growth
 Net sales grew 31% YoY (+6.9% QoQ) to INR23.1b (est INR23.9b) driven by
volume growth of 22.8% YoY (+3.4% QoQ) to 584k units (est 603k units).
 Scooters grew by 27% YoY, while 3Ws registered 60% YoY growth. Mopeds and
motorcycle also grew by 34% and 11% respectively.
 Recently launched Star City Plus motorcycle has received encouraging response.
Demand for scooters continues to remain strong.
Strong 23% volume growth …
Source: Company, MOSL
… contributed by entire portfolio
Source: Company, MOSL
Sequential change in mix in favor of motorcycles, scooters
Source: Company, MOSL
Robust 31% YoY growth in net sales
Source: Company, MOSL
New launch, extension of excise duty cut impacts margins
 EBITDA margins declined by 70bp QoQ (+10bp YoY) to 5.7% (est 6.8%).
 Disappointment was largely driven by 110bp QoQ (+160bp YoY) increase in RM
cost to 72.7% (est 71.5%).
 Staff cost also increased to 6.1% of sales (est 5.7%) on annual increments and
manpower increase.
 Other expenditure declined by 80bp QoQ (130bp YoY) to 15.5% on higher
volumes.
 We understand the major driver of RM cost increase has been: a) aggressive
market entry pricing for Star City Plus to build motorcycle franchise (similar
strategy adopted with Jupiter for scooters), b) write-off of new launch expenses
on tools, dies etc, and c) full quarter impact of excise duty cut extension
(Himachal plant).
 PBT grew by 46% YoY (+42% QoQ) to INR1.1b (est INR1.27b).

3. 24 July 2014 3
TVS Motor Company
 Tax rate increased to 28% (est 25%). Management indicated to broadly remain
at similar levels for FY15.
 PAT grew by 39% YoY (+39% QoQ) to INR723m (est INR953m).
EBITDA margin declines to 5.7% (down 70bp QoQ)
Source: Company, MOSL
Robust PAT growth on strong operating performance
Source: Company, MOSL
Downgrade FY15E EPS by 12.9%; maintain FY16E estimates; Buy
 We downgrade our FY15E EPS by 12.9% as we cut our margin expectation to
6.8% (v/s 7.4% earlier) on a) aggressive pricing strategy for new motorcycle
launches, b) factoring excise duty cut impact till Dec-14. We maintain our FY16E
estimates.
 Operating leverage, improved mix and expected improvement in motorcycle
franchise should drive margin expansion from 6.8% in FY15E to 7.9% in FY16E.
Valuation & view
 TVSL is well positioned to benefit from the scooterization wave with its
complete scooter portfolio. Over the next 12-18 months, TVSL plans to launch
multiple products across segments to reinforce and fill gaps in portfolio.
 Expect EPS CAGR of 58% with return ratios (RoE) improving from 19.7% in FY14E
to 32.6% in FY16E. We expect TVS to be net-cash by FY16E driven by strong FCF.
 TVSL trades at 18x/11.6x FY15E/16E EPS of INR8.8/13.7 respectively. Maintain
Buy with target price of INR205 (15x S/A FY16E EPS).
Revised forecast (Standalone)
(INR M) FY15E FY16E
Rev Old Chg (%) Rev Old Chg (%)
Volumes (units) 2,547,094 2,583,395 (1.4) 3,038,981 3,038,719 0.0
Net Sales 104,923 104,997 -0.1 130,580 128,555 1.6
EBITDA 7,120 7,807 -8.8 10,252 10,138 1.1
EBITDA (%) 6.8 7.4 -60bp 7.9 7.9 0bp
Net Profit 4,179 4,799 -12.9 6,509 6,501 0.1
EPS (INR) 8.8 10.1 -12.9 13.7 13.7 0.1
Source: Company, MOSL

4. 24 July 2014 4
TVS Motor Company
TVS Motor| Story in Charts: Robust 58% EPS CAGR over FY14-16E
Expect volume CAGR of 21.1% over FY14-16E
Source: Company, MOSL
Strong 28.1% CAGR in revenues over FY14-16E
Source: Company, MOSL
Strong franchise, operating leverage to drive FY16E margins
Source: Company, MOSL
Higher PAT growth with better margins, lower interest cost
Source: Company, MOSL
FCF to remain strong despite high capex plans
Source: Company, MOSL
Sharp improvement in return ratios
Source: Company, MOSL

5. 24 July 2014 5
TVS Motor Company
TVS Motor Company: an investment profile
Company Background
TVS Motor Company is 4th
largest two-wheeler company
in India. TVS Motor Company is the flagship company of
the 100 year old six billion USD TVS Group, which has
some 40 companies and holdings in the automotive
sector. TVS Motor Company offers the widest range of
product in the Indian two and three wheeler industry.
TVS Motor Company has international presence in more
than 50 countries in Asia, Africa and Latin America.
Key investment arguments
 TVSL is well positioned to benefit from the
scooterization wave with its complete scooter
portfolio.
 Over the next 12-18 months, TVSL plans to launch
multiple products across segments to reinforce and
fill gaps in portfolio.
 Expect EPS CAGR of 58% with return ratios (RoE)
improving from 19.7% in FY14E to 32.6% in FY16E.
We expect TVS to be net-cash by FY16E driven by
strong FCF.
Key investments risks
 Increasing competitiveness in two-wheeler industry
could restrict pricing power.
 Economic and political risk in key export markets
Recent developments
 Management expects 10% industry growth in FY15.
However, monsoon remains a key concern.
 Plans to launch two new motorcycles (completely
new platform) in FY15 and new Scooty Zest in 2QFY15
Valuation and view
 TVSL trades at 18x/11.6x FY15E/16E EPS of
INR8.8/13.7 respectively.
 Maintain Buy with target price of INR205 (15x S/A
FY16E EPS)
Sector view
 Long term demand drivers in place, driven by
increasing penetration in rural markets and
replacement demand from urban markets
 2W export provides huge opportunity, with ~2x India
opportunity in the markets similar to India.
 Industry dynamics favorable, with focus on
profitability rather than market share.
Comparative valuations
TVSL BJAUT HMCL
P/E (x) FY15E 18.0 15.6 17.6
FY16E 11.6 13.4 14.3
EPS Gr (%) FY15E 60.3 16.8 36.7
FY16E 55.8 14.3 22.6
RoE (%) FY15E 26.5 47.8 46.3
FY16E 32.6 47.4 46.3
EV/EBITDA (x) FY15E 10.8 34.3 12.3
FY16E 7.1 34.1 10.1
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
Consensus
Forecast
Variation
(%)
FY14 8.8 7.7 14.2
FY15 13.7 9.9 38.3
Target price and recommendation
Current
Price (INR)
Target
Price (INR)
Upside
(%)
Reco
159 205 29 Buy
Shareholding pattern (%)
Mar-14 Dec-13 Mar-13
Promoter 57.4 57.4 57.4
DII 16.9 17.7 18.2
FII 5.3 3.4 1.8
Others 20.4 21.6 22.6
Note: FII Includes depository receipts
Stock performance (1-year)

6. 24 July 2014 6
TVS Motor Company
Financials and valuation
Income statement (INR Million)
Y/E March 2014 2015E 2016E 2017E
Net Sales 79,619 104,923 130,580 149,386
Change (%) 12.7 31.8 24.5 14.4
EBITDA 4,781 7,120 10,252 12,326
EBITDA Margin (%) 6.0 6.8 7.9 8.3
Depreciation 1,317 1,519 1,637 1,781
EBIT 3,465 5,601 8,615 10,545
Interest 254 209 184 159
Other Income 302 332 366 402
Extraordinary items -13 0 0 0
PBT 3,525 5,724 8,797 10,788
Tax 909 1,546 2,287 2,805
Tax Rate (%) 25.8 27.0 26.0 26.0
Reported PAT 2,616 4,179 6,509 7,983
Adjusted PAT 2,607 4,179 6,509 7,983
Change (%) 44.0 60.3 55.8 22.6
Balance sheet (INR Million)
Y/E March 2014 2015E 2016E 2017E
Share Capital 475 475 475 475
Reserves 13,678 16,856 22,115 28,708
Net Worth 14,153 17,331 22,590 29,183
Debt 4,424 3,924 3,424 2,924
Deferred Tax 1,247 1,247 1,247 1,247
Total Capital Employed 19,824 22,502 27,261 33,354
Gross Fixed Assets 24,723 27,223 29,723 32,223
Less: Acc Depreciation 13,466 14,986 16,623 18,404
Net Fixed Assets 11,257 12,238 13,100 13,819
Capital WIP 481 381 331 281
Investments 8,959 9,959 10,959 11,959
Current Assets 14,950 20,385 28,033 35,905
Inventory 5,482 7,224 8,990 10,285
Debtors 3,341 4,403 5,480 6,269
Cash & Bank 826 2,401 5,670 10,118
Loans & Adv, Others 5,302 6,357 7,893 9,233
Curr Liabs & Provns 15,823 20,461 25,163 28,610
Curr. Liabilities 14,612 19,249 23,952 27,398
Provisions 1,211 1,211 1,211 1,211
Net Current Assets -873 -76 2,870 7,295
Total Assets 19,824 22,502 27,261 33,354
E: MOSL Estimates
Ratios
Y/E March 2014 2015E 2016E 2017E
Basic (INR)
EPS 5.5 8.8 13.7 16.8
Cash EPS 8.3 12.0 17.1 20.6
Book Value 29.8 36.5 47.5 61.4
DPS 1.4 1.8 2.3 2.5
Payout (incl. Div. Tax.) 29.6 23.9 19.2 17.4
Valuation(x)
P/E 28.9 18.0 11.6 9.4
Cash P/E 19.2 13.2 9.3 7.7
Price / Book Value 5.3 4.4 3.3 2.6
EV/Sales 1.0 0.7 0.6 0.5
EV/EBITDA 16.5 10.8 7.1 5.5
Dividend Yield (%) 0.9 1.1 1.4 1.6
Profitability Ratios (%)
RoE 19.7 26.5 32.6 30.8
RoCE 20.3 29.8 38.0 37.7
Turnover Ratios (%)
Asset Turnover (x) 4.0 4.7 4.8 4.5
Debtors (No. of Days) 14.1 14.2 14.2 14.3
Inventory (No. of Days) 25.1 25.1 25.1 25.1
Creditors (No. of Days) 71.3 71.8 72.7 73.0
Leverage Ratios (%)
Net Debt/Equity (x) 0.3 0.2 0.2 0.1
Cash flow statement (INR Million)
Y/E March 2014 2015E 2016E 2017E
OP/(Loss) before Tax 3,485 5,724 8,797 10,788
Depreciation 1,317 1,519 1,637 1,781
Others 0 0 0 0
Interest 4 209 184 159
Direct Taxes Paid 1,234 1,546 2,287 2,805
(Inc)/Dec in Wkg Cap 1,613 778 323 23
CF from Op. Activity 5,238 6,352 8,288 9,544
(Inc)/Dec in FA & CWIP -2,580 -2,400 -2,450 -2,450
(Pur)/Sale of Invt -276 -1,000 -1,000 -1,000
Others 257 332 366 402
CF from Inv. Activity -2,598 -3,068 -3,084 -3,048
Inc/(Dec) in Net Worth 0 0 0 0
Inc / (Dec) in Debt -1,069 -500 -500 -500
Interest Paid -230 -209 -184 -159
Divd Paid (incl Tax) -690 -1,001 -1,251 -1,390
CF from Fin. Activity -1,988 -1,709 -1,934 -2,048
Inc/(Dec) in Cash 651 1,575 3,269 4,447
Add: Opening Balance 175 826 2,401 5,671
Closing Balance 826 2,401 5,671 10,118

7. 24 July 2014 7
TVS Motor Company
N O T E S

8. 24 July 2014 8
TVS Motor Company
Disclosures
This research report has been prepared by MOSt to provide information about the company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its affiliated company(ies). This
report is for personal information of the select recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement to
invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been
furnished to you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal recommendation or take into
account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider whether it is suitable
for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and
investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur.
MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business
relationships with a significant percentage of the companies covered by our Research Department Our research professionals provide important input into our investment banking and other business selection
processes. Investors should assume that MOSt and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that
the research professionals who were involved in preparing this material may participate in the solicitation of such business. The research professionals responsible for the preparation of this document may
interact with trading desk personnel, sales personnel and other parties for the purpose of gathering, applying and interpreting market information. Our research professionals are paid in part based on the
profitability of MOSt which include earnings from investment banking and other business. MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from
maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, MOSt generally prohibits its analysts and persons reporting to analysts from serving as an
officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market commentary or trading
strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with
the recommendations expressed herein. In reviewing these materials, you should be aware that any or all o the foregoing, among other things, may give rise to real or potential conflicts of interest . MOSt and
its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in
any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or
lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to
hold MOSt or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The
information contained herein is based on publicly available data or other sources believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt’s interpretation of the
data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. This Report is not
intended to be a complete statement or summary of the securities, markets or developments referred to in the document. While we would endeavor to update the information herein on reasonable basis, MOSt
and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its
affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of
its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of
merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.
Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its
contents.
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of
Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
Disclosure of Interest Statement TVS MOTOR CO LTD
 Analyst ownership of the stock No
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or
will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible
for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to
law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
For U.K.
This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to
which this document relates is only available to investment professionals and will be engaged in only with such persons.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States.
In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state
laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein
are not available to or intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major
institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as
amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has
entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer,
MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research
analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors
Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore
to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Anosh Koppikar Kadambari Balachandran
Email:anosh.Koppikar@motilaloswal.com Email : kadambari.balachandran@motilaloswal.com
Contact(+65)68189232 Contact: (+65) 68189233 / 65249115
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
Motilal Oswal Securities Ltd
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com