Shares of this large-cap auto stock rallied 6.22 percent on Tuesday’s intraday Trades to reach a fresh 52-week high of ₹ 1388.45 apiece on the National Stock Exchange (NSE). This happened after the company reported its results for the April to June quarter of the current financial year (Q1FY24). Its shares closed at ₹ 1,383.70 on Tuesday.
On a consolidated basis, TVS Motor Company reported a 48.77 percent increase in its net profit to ₹ 441.47 crores in Q1FY24, as compared to ₹ 296.75 crores in the corresponding quarter of the previous year (Q1FY23). Its revenue from operations climbed 23.78 percent to ₹ 9,055.51 crores in Q1FY24, as compared to ₹ 7,315.70 crores in Q1FY23.
The company said that its overall two-wheeler and three-wheeler sales, including exports, grew by 5 per cent to 9.53 lakh units in the quarter ended June 2023 as against 9.07 lakh units registered in the same period of the 2021–22 fiscal.
Analysts believe that the company’s volume growth will likely be driven by a recovery in its two-wheeler market, new products and a recovery in exports. The company enjoys the benefits of economies of scale and operating leverage, which enable it to maintain its EBITDA margin at a double-digit level.
Jefferies believes that TVS Motors will be a key beneficiary of demand revival in export and domestic markets. It added that improving franchise provides more headroom for further margin expansion. It sees a 39 percent CAGR growth in the company’s earnings per share over FY23-25.
Analysts at Nuvama Institutional Equities said that the company’s market share has grown from 14 percent in FY18 to 16 percent in FY23, led by multiple launches like Jupiter, Zest, Ntorq, iQube, Radeon and Raider
However, analysts at Motilal Oswal Securities pointed out that TVS Motors earns nearly 40 percent of its overall EBITDA from the domestic scooter business, making it vulnerable to the electric vehicle disruption.
A few other analysts have raised concerns over the company’s high investment plans in its subsidiaries. TVS Motor Company plans to invest ₹ 9 billion in its subsidiaries of which it has invested ₹ 2 billion in TVS Credit Services, ₹ 1.8 Billion in SMEG and ₹ 2 billion in Nortan.
Global brokerage Citi says that TVS Motors has invested heavily in its subsidiaries which has resulted in increased debt levels and could negatively impact its earnings.
With a market capitalization of ₹ 62,099 crores, TVS Motors is a large-cap company. It has a high return on equity of 26.83 percent. The company’s shares were trading at a
price-to-earnings ratio (P/E) of 42.61, which is higher than the industry P/E of 16.79, indicating that the stock might be undervalued as compared to its peers.
Written by Simran Bafna
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