TVS Motor falls second day in a row on lower than expected Q1 profit

The stock dipped 18% to Rs 147 from its record high of Rs 179 touched before the announcements of June quarter results.

TVS Motor Company has dipped nearly 8% to Rs 147, extending its Thursday’s 6% decline on NSE, after reporting net profit of Rs 72 crore against an average analyst estimates of Rs 87 crore for the quarter ended June 30 2014 (Q1).

Revenues however grew 31% yoy at Rs 2,305 crore due to strong volume growth of 21.9% from new launches (Jupiter and Star City+).

However, contrary to expectations of a margin expansion on a sequential basis, the OPM contracted by 75 basis points to 5.7%.

The company has had two launches in the last six months which will be followed by another three launches in the rest of the current financial year. These new launches will be supported by advertisement and brand promotion campaigns which would limit the margin expansion in the near term, analyst at Sharekhan said in a report.

Despite the disappointment of the first quarter analyst remain positive on the stock and maintain our 18-month price target of Rs 175 on expectation that the company to deliver healthy earnings CAGR (compound annual growth rate) of 26% over FY2014-17.

The stock opened at Rs 157 and has seen a combined 5.88 million shares changing hands on the counter till noon deals on NSE and BSE. Meanwhile, the stock has corrected 18% from its record high of Rs 179 touched before the announcements of June quarter results.