TVS Motor’s (TVSM) Q4FY08 results were extremely disappointing with the company failing to meet our highly conservative estimates.
Going forward, we do not anticipate much improvement in TVSM’s performance due to fierce competition in the two-wheeler market, high interest rates (which affects demand for entry segment two-wheelers) and the ever-increasing input cost pressures.
The stock is currently trading at a P/E of 7.8x, P/BV of 0.7x and EV/EBITDA of 8.7x on its FY10E, which we find expensive given the company’s lacklustre performance.
We have revised our estimates for FY09 and FY10 downwards in view of the disappointing results and bleak growth outlook. Further, we are cutting our target P/E multiple for the stock from 10x to 8x on FY10E.
This gives us a revised target price of Rs26 from Rs45 previously. We maintain SELL recommendation on the stock.