 "TVS")
Shares of TVS Motor Company hit a fresh 52-week high of Rs 1,235 o the BSE, surging 5.5 per cent in an otherwise weak market, after the two-wheeler major posted better than expected March quarter results. At 10:00 AM, the shares had come off highs as they wre up 3 per cent as against a 0.4 per cent dip in the benchmark S&P BSE Sensex.
The Chennai-based automobile major, on Thursday, posted a 22 per cent rise in consolidated net profit during the fourth quarter of 2022-23 to Rs 336 crore, as compared to Rs 275 crore during the January-March period of 2021-22, due to a rise in sales.
The overall two-wheeler and three-wheeler sales, including exports, was at 868,000 units in Q4FY23 as against 856,000 units registered in the year-ago period. Motorcycle sales for the quarter ended March 2023 were at 389,000 units as against 442,000 units in the March 2022 quarter. Scooter sales for the quarter ended March 2023 grew by 30 per cent.
Electric vehicles (EV) saw sales of 43,000 units in the quarter ended March 2023 as against 6,000 during the quarter ended March 2022 and 29,000 units during the quarter ended December 2022. Three-wheeler sales for the quarter under review was 29,000 units as against 42,000 units in the fourth quarter of 2021-22.
Its revenue from operations, meanwhile, saw a 22 per cent rise to Rs 8,031 crore against Rs 6,585 crore during the same quarter last year. For FY23, net profit zoomed 79 per cent to Rs 1,309 crore, and revenue increased from Rs 24,355 crore last year to Rs 31,974 crore.
Operationally, net realizations improved 18 per cent YoY (2 per cent QoQ) to Rs 76,100 (v/s estimate of Rs 76,800) due to price hikes and favorable forex. Volumes were flat YoY/QoQ to 868,400 units. Gross margin improved 80bp YoY/10bp QoQ and stood at 24.6 per cent (v/s estimated 24.8 per cent) due to slight softening of costs.
Motilal Oswal Financial Services believes the volume growth was liekly driven by recovery in domestic 2W market, new products (Raider, 125CC scooters and iQube) as well as a recovery in exports. "TVSL is enjoying the benefits of economies of scale and operating leverage, due to which the Ebitda margin is sustaining at double-digit level. However, TVSL earns around 40 per cent of its overall Ebitda from the domestic Scooter business, making it vulnerable to an EV disruption," it said while maintaining its 'Neutral' rating on the stock.
Valuations at 27.4x/23.6x FY24E/FY25E EPS largely reflect its strong earnings growth as well as increasing risk of EVs. Thus, we reiterate Neutral with a target price of Rs 1,060, it added.
Phillip Capital, on the flipside, has maintained its 'Buy' rating as it believes TVS Motor will outperform the industry on the back of premium segment and urban markets (scooters) doing well, better product and segment mix, improving operating structure with cost savings, and sharp EPS growth.
"That said, we feel the EV adoption pace could get impacted if there is any adverse change in the FAME 2 subsidy, as that would impact future investment plans and formation of separate subsidiary. We believe, higher multiples for TVS reflect its high earnings growth (FY22-25e EPS CAGR of 41 per cent)," it added.
