Prefer TVS Motor to Bajaj Auto on robust product launches: Gaurav Mehta

In a chat with ET Now, Gaurav Mehta, VP, Institutional Equities, Ambit Capital, shares his stance on two-wheeler stocks.

ET Now: What is your view on TVS Motors within the two wheeler pack? We have seen how Bajaj Auto is turning around. The impact has been visible in Bajaj Auto’s stock performance so far this calendar. There is so much resounding confidence over a strong comeback of export business. The two-wheeler maker is going to be benefited from rural sales and new products (especially in the entry level segment). What is the reason for you not preferring Bajaj Auto to TVS?

Gaurav Mehta: There are two-three different reasons. In terms of product launches, if you look at the last 12-18 months, TVS has clearly been a winner versus any other two-wheeler company in the country.

Bajaj has been coming up new product launches are predominantly rehashed versions of their existing models. This is except for CT100 which the company re-launched a few months back.

That particular product is something that is driving the company’s volumes at the moment. It is just a single product that has actually seen some success with Bajaj Auto.

On the other hand, TVS has had a slew of launches including Jupiter, Zest, Apache andStar City plus.

ET Now: But, isn’t the trigger reflecting in the prices?

Gaurav Mehta: Not really. On valuations basis, the earnings trajectory and the margin expansion that we have built in suggest that TVS trades at something like 14 times FY17 earnings. Bajaj Auto on the other hand would trade at around 16 times FY17 earnings.