scorecardresearchHero MotoCorp vs TVS Motor: Which two-wheeler maker to buy after Q4 earnings?
TVS Motor Company reported an 11% YoY growth in two- and three-wheeler sales, with 36.82 lakh units sold in FY2022-23. Hero MotoCorp sold 53.29 lakh units in the same fiscal year, a YoY increase of 7%.

Hero MotoCorp vs TVS Motor: Which two-wheeler maker to buy after Q4 earnings?

Updated: 10 May 2023, 01:00 PM IST

Brokerage firms Emkay Global and Anand Rathi have maintained their ‘buy’ ratings on TVS Motor with a target price of 1,390 and 1,370 apiece, respectively.

Two of the country's top motorcycle manufacturers, Hero MotoCorp and TVS Motor Company, announced their Q4 earnings on May 04. Hero MotoCorp's results have beaten expectations, while TVS Motor's results are in line with analysts' estimates.

The insights from these results shed light on the performance of these top motorcycle manufacturers, especially considering the recovery of two-wheeler sales, particularly in urban categories.

Top-Line Performance

Hero MotoCorp, the world's largest manufacturer of motorcycles and scooters, reported a 12% rise in its consolidated revenue to Rs. 8,307 crore for the March quarter.

On the other hand, TVS Motor Company recorded a 19% YoY growth in its revenue from operations, which stood at Rs. 6,605 crore in Q4FY23 as compared to Rs. 5,530 crore in Q4FY22.

Operating Performance

TVS Motor Company reported a record standalone operating profit of Rs. 680 crore in Q4, marking a 22% YoY growth from Rs. 557 crore in the same period last year.

In comparison, Hero MotoCorp's Q4 FY23 operating profit stands at 1,083 crore, indicating a robust growth rate of 31%.

During Q4FY23, TVS Motor Company's operating profit margin remained unchanged at 10%, while Hero MotoCorp's operating margin showed a YoY expansion of 200 basis points and a QoQ expansion of 100 basis points, standing at 13% in the March Quarter.

Net Profit

TVS Motor Company reported a significant surge in its standalone net profit for Q4FY23, increasing by nearly 50% to Rs. 410 crore, as compared to Rs. 274 crore in the corresponding period of the previous fiscal year.

In case of Hero MotoCorp, the standalone net profit for Q4FY23 surpassed market expectations, rising 37% to Rs. 859 crore, compared to Rs. 627 crore in Q4FY22.

The Q4FY23 net profit was also higher than the company's net profit of Rs. 711 crore in the preceding December quarter of FY23.

Both companies reported impressive growth in their net profits, with Hero MotoCorp beating market estimates and TVS Motor Company recording a significant YoY increase in net profit.

Full-Year Performance

TVS Motor's revenue from operations for the financial year 2022–23 surged by 27% to reach Rs. 26,378 crore, up from Rs. 20,791 crore in the previous year. During the same period, the company's PAT stood at Rs. 1,491 crore, a significant 66.7% increase from the previous year's Rs. 894 crore.

On the other hand, Hero MotoCorp recorded a remarkable 18% surge in standalone net profit for the financial year 2022–23 at 2,911 crore. While the revenue from operations during 2022–23 stood at 33,806 crore, an impressive growth of 16% from 29,245 crore in FY22.

Sales in March Quarter

In Q4 FY23, TVS Motor Company sold 3.89 lakh units of motorcycles, a marginal drop from 4.42 lakh units sold in Q4 of FY'22. However, scooter sales increased by 30%, with 3.40 lakh units sold in Q4 of FY'23 as compared to 2.62 lakh units sold in the same period of FY'22.

The company's electric vehicle sales also saw significant growth, with 0.43 lakh units sold in Q4 of FY23 compared to 0.06 lakh units in Q4 of FY22 and 0.29 lakh units in Q3FY23.

Overall two-wheeler and three-wheeler sales, including exports, were 8.68 lakh units in Q4FY23, as against 8.56 lakh units registered in Q4FY22.

In comparison, Hero MotoCorp sold a combined total of 12.70 lakh units of motorcycles and scooters in Q4 of FY23, up from 11.89 lakh units sold in the corresponding quarter of the previous fiscal year.

Full-Year Sales

During the year ended March 2023, the overall two- and three-wheeler sales of TVS Motor Company, grew by 11% to 36.82 lakh units as against 33.10 lakh units in the year 2021–22.

The company sold 17.33 lakh units of motorcycles in the fiscal year 2022–23, compared to 17.32 lakh units in the previous fiscal year. Scooter sales saw a growth of 45%, with 13.34 lakh units sold in the same fiscal year versus 9.23 lakh units in the previous year.

Additionally, electric vehicle sales registered 0.97 lakh units in 2022–23 as compared to 0.11 lakh units in 2021–22, with over one lakh satisfied customers.

On the other hand, Hero MotoCorp sold a total of 53.29 lakh units of motorcycles and scooters in the fiscal year 2022–23, compared to 49.44 lakh units sold in the previous fiscal year.

Brokerages Upbeat

Brokerage firm Emkay Global maintained its ‘buy’ call on TVS Motor with a target price of 1,390 apiece. The brokerage said the company is well-positioned to deliver a volume, revenue, and earnings per share CAGR of 16%, 20%, and 32%, respectively, over FY23–25E.

Emkay Global highlighted the company's emergence as a leader in electric two-wheelers, improving positioning in premium motorcycles, scooters, and exports, and the ongoing recovery in the two-wheeler industry, particularly in urban categories.

Another brokerage firm, Anand Rathi, also retained a ‘buy’ call on TVS Motor with a target price of 1,370 apiece, citing expectations of a cyclical upturn in domestic and export two-wheelers, market share gains, a relentless EV strategy, and margin expansion.

The brokerage expects a CAGR of 19% for revenue and 31% for PAT (profit after tax) from fiscal year 2023 to 2025. Despite the high capital expenditure (approximately 10 billion per year) and equity investments (approximately 7 billion per year), the company is expected to generate a free cash flow of 12.4 billion per year over the same period. This is primarily due to the company's strong earnings growth.

Reliance Securities maintained its 'buy' recommendation on Hero MotoCorp with a target price of 3,000 apiece. The firm cited multiple reasons for its positive outlook, including the revival of rural demand after Rabi harvesting, a focus on the premium segment, HMCL's market leadership position, and an attractive valuation.

The brokerage believes that the better product mix, regular price hikes, and likely recovery in the 2W industry, coupled with declining commodity costs, would support HMCL’s margin expansion going forward.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.


Hero MotoCorp vs TVS Motor
Hero MotoCorp vs TVS Motor
First Published: 08 May 2023, 11:05 AM IST