TVS Motors Company Limited (TVSM), the third-largest two-wheeler manufacturer in India, is a part of TVS Group; it manufactures motorcycles, scooters, mopeds and three-wheelers in India. TVS Motors is credited with many innovations in the Indian automobile industry, notable among them being the introduction of India’s first two-seater moped, the TVS 50cc. The company has presence in all the three sub-segments of two wheelers, i.e., motorcycles, scooters & mopeds as well as the three-wheeler segment.
In Q3FY19, Revenue declined by 7% QoQ basis – recent increase in insurance costs that impacted the demand for two-wheelers, while the festive demand this year has been lower than expected. Although EBITDA grew by 25% YoY , the EBITDA margin was flat at 8.1% YoY. Going forward, margins are likely to remain flat on account of: cost pressure due to higher raw material costs, weak Indian rupee and rising regulatory related costs.
The company is overvalued with a P/E ratio of 31.10x as compared to the industry median of 17.05x making it an ideal time to sell the stock.
TVS has been in a down trend on the weekly chars. The stock is making lower tops and lower bottoms on the weekly charts an indication of the intermediate trend of the stock being down. A bullish crossover on the moving averages failed, the same has been circled on the charts. A failure is an indication of extreme weakness. The stock has corrected from there and has broken important supports. The Fib confluence at 486 stands broken and that’s an indication that the stock is headed south. The next support is at 394-408 and that’s where the stock is headed for now. The #moving averages on the RSI have also given a bearish crossover and is trading below 40 which is an indication of weakness. Hence both the price and momentum indicators are showing signs of weakness and the good #support now stands nearly 10% from current levels of 459.