tvs shrichakra
Printed From: The Equity Desk
Category: Investment Ideas - Creating winning portfolios!
Forum Name: Stock Synopsis
Forum Discription: A bried discussion of companies on very specific matters. Normally this is the prelude for further research as always members would be discussing quality companies with good management only
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=2968
Printed Date: 21/Apr/2025 at 2:56pm
Topic: tvs shrichakra
Posted By: anshumanmohta
Subject: tvs shrichakra
Date Posted: 02/Sep/2010 at 5:07pm
TVS SRICHAKRA------buy CMP—330 .
TVS SRICHAKRA is the market leader in two wheeler tyres. It’s having a management which cannot be questioned. There are only majorly three companies manufacturing two
Wheeler tyres viz TVS, MRF, CEAT of which the capacity of TVS is the highest. They will be rolling out 3 crores tyre and around same number of tubes from around 1.2 crores of the last financial. Thus their capacity has almost tripled in this financial.
They did a topline of around 700 crores last year and as their capacity has tripled then this year they should be doing somewhere around 1500 crores (taking into considerations some bottlenecks initially) and next year around 1800 crores. Selling should not be any problem as it is the market leader in the sector and it is the only company which will have such huge production. Also they have contracts with Bajaj, Hero Honda for tyres in their new vehicle. They sell tyres for new vehicle in the brand name Eurogrip. With all time high sales done by all these two wheeler manufacturing companies since two years, the vehicles should be coming for tyre replacement latter this year or early next year i.e. in the third or the fourth quarter of this financial. With the capex already in place they should be able to meet up with the demand which is expected to come.
This can be seen that there is huge demand for tyres as all tyre manufacturers are passing the increasing cost of rubber which is their major raw material to the customers by hiking the prices of tyres regularly since past one year. The prices of tyres are moving up in tandem with the prices of rubber. This can be confirmed by any tyre dealer. So one can imagine that, demand for new vehicles, old vehicles (two-year old) coming for replacement, also older vehicles which are again huge in number coming for replacement regularly. Also there is practically no foreign player in the two wheeler tyre market. So TVS is totally ready to take advantage of the demand coming and going to come.
One important thing which favors TVS is that it also gives tyres solely to TVS motors which is the third largest two wheeler manufacturer in the country after Hero Honda and Bajaj. The models Jive and Wego of TVS motors are already finding good response in the market. So there should not be any problems for the company to sell its extra added capacity.
Their new capacity seems to have come up in Uttaranchal where they will be getting some tax benefits and also to cater to northern markets more easily and efficiently making its presence throughout the country.
It announced a dividend of Rupees 10/- giving it a yield of around 3.5%, and also it is a regular dividend payer.
Downside of the stock is insulated as the total number of shares of the company is only 76.6 lakhs of which around 60% is owned by the management and HNIs.
The market cap for the stock is around 210 crores. A market leader having capex done, which did a topline of 700 crores and shall be doing a topline of 1500 crores, the market cap seems too less. It can easily have a market cap of around 800 to 1000 crores in two years. So the stock can easily grow 4 times from here in two years. The debt in the books is around 150 crores which is nothing with the top line growth the company is targeting.
Last year the net profit margin was around 4.25%, we assume that with the increase in topline the net profit margin should improve with around 75 basis points at least making it to 5%. So the net profit for the year can be around 65 to 70 crores (conservatively) giving an Eps of around 80. If we give a pe of say 7 to the sector stock can go to around 560 levels this year. Still it should have more room for upside from there. Long term investors can continue to hold from there too.
Practically there seems to be no risk but still if the production does not match the capacity it is having due to any problems or bottlenecks then the targets can falter this year but they can be achievable next year. If the raw material prices still become dearer and if the company is not able to pass the prices to the consumers then margins can be hit. But this possibility seems very less.
Happy investing……
Anshuman Mohta.
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anshuman
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Replies:
Posted By: hit2710
Date Posted: 02/Sep/2010 at 7:23pm
Hi,
Does the company make only two and three wheeler tyres or they also make car and other four wheeler tyres as well?
For quarter ended June 2010, the net profit margin is around 3.27, which is lowest in last five quarters. Is that because of impact of high rubber prices?
regards
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Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.
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Posted By: anshumanmohta
Date Posted: 04/Sep/2010 at 4:34pm
the company is the market leader in two and three wheelers. Yes the net profit margin has gone down mainly due to high rubber prices, but they are able to pass on the prices of rubber to a major extent to tyres, this is the command of tyre companies in the current market scenario. Due to good rains this year they are expecting rubber prices to soften , but the prices of tyres willnot be rolled back, the only reason is huge demand and and restrictined production. For this reason their expansion is complete which is three times the production. The only reason i think their margin has softened because their new plant has just comissioned and their other expenses and depreciation has increased which should settle down over a period of time as the management of tvs grop is not questionable. And other things will be clarified in the agm
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anshuman
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Posted By: hit2710
Date Posted: 04/Sep/2010 at 7:32pm
Thanks anshuman. The company certainly looks interesting. And most tyre companies are on fire so situation here should be no different.
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Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.
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Posted By: anshumanmohta
Date Posted: 04/Sep/2010 at 7:42pm
and the main thing is that with capex done, market leader , great management available at just around 250 crs. i bought some, here is opportunity for all.
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anshuman
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Posted By: vijayM
Date Posted: 04/Sep/2010 at 9:04pm
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Here are some key financials of this company. Seems interesting.
Debt-equity is 2.2
LT debt equity is 0.66
Latest ROE is 40%
5 year avg ROE is 18
Latest ROCE is 24%
5 year avg ROCE is 14.7
TTM eps = 39.67
PE=8.6
Equity capital =7.66 Cr.
Mkt Cap=260 Cr.
Sales (TTM)=769.7 Cr.
Mkt cap/Sales = 0.33
Sales CAGR = 23%
Book value = 112
price/bV=3
div = 100%
dpr= 0.25
Growth rate =ROE (1-dpr)=30%
Basant sir, your view on this stock???
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If a business does well, the stock eventually follows:Warren Buffett
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Posted By: India_Bull
Date Posted: 04/Sep/2010 at 2:39am
Net Profit Margin- 4.26 % and Total Debt- 175 Cr (Ref Edelweiss) for a company having Mkt Cap of 260 Cr company worries me.Rest seems to be good...
May be experts can throw light on this. I think I recently saw some advt on TV as well !
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India_Bull forever Bull !
www.kapilcomedynights.com
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Posted By: NeerajMarathe
Date Posted: 06/Sep/2010 at 5:45pm
Just some points:
1) they are also into tractor tyres (which they export)..
2) debt stands at 175 cr.. average cost of debt is about 9.5%...keeping other factors constant, if cost of debt increases by even 50 bps, it hits EPS by about Rs.1.50..in an environment where interest rate hike is possible going fwd, high debt should be a factor kept in mind while investing..
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Regards
Neeraj Marathe
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Posted By: anshumanmohta
Date Posted: 06/Sep/2010 at 10:42pm
iguess when their production goes up, bottomline should increase and they should be paying back some of their debt
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anshuman
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Posted By: anshumanmohta
Date Posted: 06/Sep/2010 at 10:49pm
i think the management is rock solid, compared to or better than a vguard kind of management.........catch it young
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anshuman
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Posted By: anshumanmohta
Date Posted: 12/Sep/2010 at 11:29pm
rubber futures going down
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anshuman
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Posted By: India_Bull
Date Posted: 12/Sep/2010 at 1:17am
Anshuman why are you promoting this company?
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India_Bull forever Bull !
www.kapilcomedynights.com
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Posted By: sainivas
Date Posted: 20/Sep/2010 at 3:49pm
We are all looking at TVS Sri becos of its positives. It would be nice to hear about the negatives and issues of the company/industry so that we all know what we are getting into:
+80 year old Chairman, is that right?
Chinese imports: nearly 1 lac truck tyres being reportedly imported PM...tho the duty structure is likely to be corrected..
Very heavy (inverse)correlation between margins and rubber prices..Rubber prices are nearly 70% higher than a year ago...so margins of past 4 quarter sustainable?
PE: Tyre co's are at very low PEs despite the best demand in their lifetimes..Why?
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Agey Dekho
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Posted By: anshumanmohta
Date Posted: 20/Sep/2010 at 11:04pm
this is a twowheeler tyre co.in which practically there are hardly any exports.
chairman might be of the age but now its not a one man show,like in the case of hdfc.
the main thing is that if the rubber prices correct willthe tyre companies roll back the prices????.........demand is very high as you mentioned so there should not be rollbacks in the same proportion
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anshuman
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Posted By: jigneshk
Date Posted: 16/Jul/2011 at 6:51pm
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natural rubber price down 24% from peak. what is view now?
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Posted By: shenv4sn
Date Posted: 26/Jan/2013 at 6:29pm
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