TVS Motor Company rallies 15% on better-than-expected Q4 show

Shares of TVS Motor Company rallied 15 per cent in Wednesday's session after the two-wheeler maker posted better-than-expected results for the quarter ended March 2021 (Q4FY21).  

The company on Tuesday posted a nearly four-fold increase in its consolidated net profit to Rs 319.19 crore for the fourth quarter of FY21, riding on the back of robust sales in the domestic and international markets.

Revenue from operations rose to Rs 6,131.90 crore in the fourth quarter from Rs 4,104.71 crore in the same period of 2019-20 fiscal. The Ebitda (earnings before interest, tax, depreciation and amortisation) jumped 119 per cent to Rs 536.11 crore as against Rs Rs 244.85 crore in the year-ago period.

The opearting margins, meanwhile, came in at 10.1 per cent in the quarter under review versus 7 per cent in the March quarter last year.

Following this, the stock jumped to an intra-day high of Rs 649.95, up 14.99 per cent, on the BSE. Around 10.10 am, it was up 14.34 per cent at Rs 647.50 as against a rise of 0.76 per cent in the S&P BSE Sensex at the same time.

"TVS Motors Q4FY21 results were significantly ahead of our and consensus estimates. While commodities continue to inch upward, the company was able to mitigate the impact via price hikes and better mix," said analysts at CLSA.  

The brokerage increased its FY22-23 EPS estimates to 13-15 per cent and maintained Outperform rating on the stock. It also raised the target price on the stock from Rs 600 to Rs 665.

"While the stock continues to trade at a premium to its mass-market two-wheeler peers, we believe this trend can continue due to share gains, higher EPS growth and improving FCF conversion," the global brokerage added.

Prabhudas Lilladher also raised the earnings estimates for the stock and upgraded it from Sell to Buy with a target price of Rs 658.

"TVS reported healthy beat to our Ebitda and PAT estimates. We were surprised with QoQ gross margins expansion as cost control and price hikes offset the raw material impact. We expect near term volume challenges withstanding due to lockdown, while double-digit Ebitda performance is likely to sustain backed by further cost reduction efforts and price increase," it said.

The brokerage raised its FY22/23 EPS by 35.1 per cent/26.5 per cent to factor in better realisations and cost control benefits.