TVS Srichakra is a leading tyre manufacturer in India, rolling out over 11 million tyres a year. The TVS group major manufactures a complete range of two- and three-wheeler tyres and tubes for the domestic market and industrial pneumatic tyres, farm & implements tyres, skid steer tyres, multipurpose tyres, floatation tyres etc. for the export market at its plant in Madurai. Long term prospects for the company are quite good. Just consider:
- The company has the distinction of being associated with all the leading vehicle manufacturers in their new model development. This has significantly improved the company's position in the market especially for Motorcycle tubeless tyres and Scooter tyres.
- The company has grown in Original Equipment Manufacturers segment by both volume and value growth and has been growing faster than the industry.
- It is planning an aggressive growth in export market this year. The export market is bouncing back and has reached the pre-recession days in volume. The company has seen an increase in off-take from existing customers and has won new customers in USA and other Countries. In 2010-11 the company's export business grew 23 per cent from Rs. 95 crore to Rs. 117 crore.
- The company is planning the development of radial rear tractor tyres. It has also identified new markets for its two-wheeler tyres for export and expects to grow this as well.
- Growth in two-wheeler demand is mainly from youth and lower middle class population. Urbanization of smaller towns also fuels the demand in 2-3 wheeler segments. Smaller towns are expected to contribute significantly to the company's target segment.
- Market indications are that the tyre industry will see a double digit growth for the 3rd consecutive year in 2011-12. TVS Srichakra will make all efforts to sustain and improve the share of business with major original equipment makers. Concentration on new product development will also accelerate growth.
- Various brand building activities including below-the-line activities undertaken by the company during the year 2010-11 would augur well to increase its presence in the after-sale market. Its efforts to expand the dealer network and improve the distribution channel would help sustain and increase the market share.
- In the quarter ended June 2011, sales grew 54 per cent to Rs. 350.93 crore. Share of OPM business increased 70 bps to 9.9 per cent. The net profit jumped 63 per cent to Rs. 12.10 crore.
The detailed information about the company is as following:
BSE ticker code: 509243NSE ticker code: TVSSRICHAK
Major activity: Tyres
Chairman S Narayanan
Equity capital: Rs. 7.66 crore. FV: Rs. 10
52 week high/low: Rs. 400/Rs. 226
CMP: Rs. 340
Market Capitalisation: Rs. 260 crore
Recommendation: Buy
In 2011-12 we expect the company to register EPS of Rs. 65.1. The share trades at Rs. 340. P/E works out to 5.2.
| Year | Net | Net | EPS | Div | BV | RONW | |
|---|---|---|---|---|---|---|---|
| sales | profit | (Rs) | (%) | (Rs) | (%) | ||
| 2009-10 | 706.39 | 29.82 | 38.9 | 100.00 | 112.05 | 39.55 | |
| 2010-11 | 1097.26 | 39.17 | 51.2 | 125.00 | 148.62 | 39.23 | |
| 2011-12 (E) | 1365.48 | 49.86 | 65.1 | 150.00 | 198.71 | 39.59 |
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