Stock investors are greedy people; nominal returns are not enough,
only multibagger returns appeal to them. But more often than not, such a
trade comes to light only after the stock has run the race.
Worse still, there is this rare occasion when most analysts are negative on a stock and yet it keeps rallying!
We all knew TVS Motor, but rarely talked about it as it was way down the order in the two-wheeler space. Look back and you realise this stock has delivered something like a 1,500 per cent returns in five years.
Missed opportunity? Ah, that can’t really give solace.
Shares of TVS Motor has zoomed 1,500 per cent in last five years (from Rs 33 level to Rs 535 level), compared with a 60 per cent rally in LML, 94.49 per cent jump in Bajaj Auto and 105 per cent surge in Hero MotoCorp.
Most analysts failed to see this stock surging. But they now believe while the company is on a firm footing, valuations are not comfortable enough for any significant upside potential from the current level.
“TVS’ numbers have been consistently very good. They have been performing very well. The company had some issues with the motorcycle volumes, but it was able to make up for it with scooters. I must admit that our call on TVS has gone wrong consistently, because from Rs 270 onwards, we kept a sell rating on TVS,” said Daljeet Singh Kohli of IndiaNivesh.
The stock was trading at Rs 535 on Tuesday.
Kohli said his thesis for the ‘sell’ rating was based on the fact that the stock was trading at twice the multiple of Hero Honda and Bajaj, whereas margin profile was half of theirs. Even return ratios were half of theirs. “Going by valuation theory and on pure fundamentals, it does not make sense to go for a company that is making half the margins to trade at double the valuation of its peer,” Kohli said.
The company reported 16 per cent YoY growth in two-wheeler sales in May at 2,82,007 units, against a 10 per cent drop in sales for Bajaj Auto and 9 per cent rise in sales for Hero MotoCorp.
P Phani Sekhar, Fund Manager, PMS at Karvy Stock Broking says Royal Enfield maker Eicher was more glamorous than TVS.
“The central problem with TVS was that it had a 6 per cent market share with 6 per cent Ebitda margin. Till it improved market share, margins could not have improved,” Sekhar said.
Kohli of IndiaNivesh said the market was probably looking at the volume numbers only, and the likely launch of a BMW bike (G310R).
That again is kind of a trigger for them.
“The stock is highly overvalued. We have been keeping a sell rating on it, and we will continue with that. We prefer Hero Moto to TVS and I think we will continue with that,” Kohli said.
Brokerage Sharekhan likes TVS Motor, as it believes in the company’s ability to gain market share consistently, propelled by new launches and its focus on the forthcoming high-margin premium motorcycle segment can help it improve margins.
Worse still, there is this rare occasion when most analysts are negative on a stock and yet it keeps rallying!
We all knew TVS Motor, but rarely talked about it as it was way down the order in the two-wheeler space. Look back and you realise this stock has delivered something like a 1,500 per cent returns in five years.
Missed opportunity? Ah, that can’t really give solace.
Shares of TVS Motor has zoomed 1,500 per cent in last five years (from Rs 33 level to Rs 535 level), compared with a 60 per cent rally in LML, 94.49 per cent jump in Bajaj Auto and 105 per cent surge in Hero MotoCorp.
Most analysts failed to see this stock surging. But they now believe while the company is on a firm footing, valuations are not comfortable enough for any significant upside potential from the current level.
“TVS’ numbers have been consistently very good. They have been performing very well. The company had some issues with the motorcycle volumes, but it was able to make up for it with scooters. I must admit that our call on TVS has gone wrong consistently, because from Rs 270 onwards, we kept a sell rating on TVS,” said Daljeet Singh Kohli of IndiaNivesh.
The stock was trading at Rs 535 on Tuesday.
Kohli said his thesis for the ‘sell’ rating was based on the fact that the stock was trading at twice the multiple of Hero Honda and Bajaj, whereas margin profile was half of theirs. Even return ratios were half of theirs. “Going by valuation theory and on pure fundamentals, it does not make sense to go for a company that is making half the margins to trade at double the valuation of its peer,” Kohli said.
The company reported 16 per cent YoY growth in two-wheeler sales in May at 2,82,007 units, against a 10 per cent drop in sales for Bajaj Auto and 9 per cent rise in sales for Hero MotoCorp.
P Phani Sekhar, Fund Manager, PMS at Karvy Stock Broking says Royal Enfield maker Eicher was more glamorous than TVS.
“The central problem with TVS was that it had a 6 per cent market share with 6 per cent Ebitda margin. Till it improved market share, margins could not have improved,” Sekhar said.
Kohli of IndiaNivesh said the market was probably looking at the volume numbers only, and the likely launch of a BMW bike (G310R).
That again is kind of a trigger for them.
“The stock is highly overvalued. We have been keeping a sell rating on it, and we will continue with that. We prefer Hero Moto to TVS and I think we will continue with that,” Kohli said.
Brokerage Sharekhan likes TVS Motor, as it believes in the company’s ability to gain market share consistently, propelled by new launches and its focus on the forthcoming high-margin premium motorcycle segment can help it improve margins.
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