Shares of two-wheeler firm TVS Motor Company (TVS) surged 5 percent in an otherwise weak market after the firm reported better-than-expected earnings for the quarter ended December 2022 (Q3FY23).
The stock surged as much as 5.1 percent to ₹1,036.70 in intraday deals. However, it has shed 4.5 percent in January so far. In the last 1 year, the stock surged 60 percent on the back of a revival in demand.
The company posted a net profit of ₹352.75 crore, up 22.5 percent year-on-year in Q3FY22 as compared to ₹288 crore in the corresponding period of last year.
Its revenue advanced nearly 15 percent YoY to ₹6,545.42 crore in the third quarter as against ₹5,706.43 crore in the same quarter of last year. Meanwhile, its operating EBITDA rose 16 percent to ₹659 crore as against ₹568 crore in the third quarter of FY22.
The company has also declared an interim dividend of ₹5 per equity share aggregating to ₹238 crore for fiscal 2023.
For the quarter under review, TVS Motor has registered total two-wheeler sales of 8.36 lakh units as against 8.35 lakh units in the quarter ended December 2021. Two-wheeler export sales were at 2.07 lakh units as against 2.53 lakh units in December 2021.
Let's see what brokerages have to say about the firm post its Q3 results:
HDFC Securities: As per the brokerage, TVS continued to outperform peers for FY23(YTD): (1) It gained a 40bps market share in motorcycles to 8.2 percent. (2) In scooters, it is the biggest gainer and its market share is up 260 bps to 23.4 percent. (3) In exports, while the 2W industry volume is down 12 percent, TVS exports were down 7 percent. With supply challenges now largely over, the brokerage expects TVS’ outperformance to continue on the back of the ramp-up of its launches, including the new Ronin and Raider. Even in EVs, it seems to be ahead of its listed peers with a strong product pipeline in place for the next 24 months; it has signed up with industry experts and JV partners to emerge as a leading player in EVs. The brokerage maintained a ‘buy’ call with an unchanged TP of ₹1,275/share, valued at 28x September 24 EPS.
Emkay: "Q3 EBITDA grew by 16 percent YoY to ₹660 crore, slightly below our estimates due to the adverse mix owing to the increasing share of EVs. Management expects the margin to improve ahead, on a better scale, with commodity deflation and cost savings. Revenue increased by 15 percent to ₹6,550 crore, coming in 3 percent above estimates due to better-than-expected realizations and spare-part sales. We reduce FY24-25E EPS by 3 percent each, factoring in the lower margin assumptions," said Emkay.
The brokerage maintained its positive stance on the stock, underpinned by: 1) expectations of a cyclical upturn in domestic 2Ws which generally lasts for at least 3 years; 2) increasing focus on EVs and premium models; and 3) market-share gains in the domestic & overseas markets. It maintained a ‘buy’ call with a TP of Rs1,220/share (unchanged), based on 25x FY25E EPS (Dec-24E earlier).
Prabhudas Lilladher: Despite strong results, the brokerage trimmed its EBITDA estimates by 4 percent for FY24 and 3 percent for FY25 to factor in the negative impact of the loss-making EV segment. In 3QFY23, higher EV volumes at 29k units (+87 percent QoQ) led to better-than-expected ASPs ( ₹74.4k, +6 percent QoQ), however, this also led to a miss in EBITDA margin as the EV business is loss-making, noted the brokerage. The brokerage pointed out that the company aims at doubling EV volumes in 4Q vs 3Q and the management remains confident of growing ahead of the industry, helped by improved semiconductor supply and higher growth in the premium segment. Though the entry-level space continues to remain impacted due to lower customer affordability, TVS will benefit from its exposure to the export market, premium segment and 3Ws, it added.
The brokerage maintained a ‘buy’ call with a target price of ₹1,240 at 26x Dec-24E EPS including ₹33 for TVS credit.
Motilal Oswal: "TVS' Q3FY23 operating performance was in line, driven by higher ASPs despite flat volumes. Export markets are seeing some green shoots in Q4, while domestic demand should benefit from positive agri indicators and improving supplies for premium products. TVS is focusing on ramping up production of e-scooters, following up with product launches in e-2Ws/3Ws in the next 1.5 years. We maintain our FY23E/FY24E EPS. Retain Neutral with a TP of ₹1,000," said the brokerage.
The brokerage further noted that TVS' volume growth is likely to be driven by a recovery in the domestic 2W market, new products (Raider and iQube) and a recovery in exports. TVSL is enjoying the benefits of economies of scale and operating leverage, resulting in a consistent double-digit EBITDA margin. However, TVS earns 40 percent of its overall EBITDA from the domestic scooter business, making it vulnerable to EV disruption, it added.
