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In FY24-25, the Indian automobile industry witnessed a notable upswing, marked by a 12.5% surge in domestic sales over the preceding year. This expansion was fueled by strong economic fundamentals, supportive government initiatives, and a growing emphasis on sustainability practices like ethanol blending and the adoption of electric vehicles (EVs). 

Jefferies Group stands as a prominent player in the realm of comprehensive investment banking and capital markets services. Offering a spectrum of offerings including capital markets facilitation, financial advisory services, institutional brokerage, securities research, and asset management, the firm caters to diverse client needs. 

Hero MotoCorp Ltd 

The Company is engaged in the manufacturing and selling of motorized two-wheelers, spare parts, and related services. The Company has over 9.50 million annual production capacity across 8 manufacturing facilities i.e., 6 in India and one each in Colombia and Bangladesh. 

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The company’s shares have delivered returns of 53 percent in six months and 84 percent in a year. 

The shares of Hero MotoCorp Ltd gained around 2.5 percent to high of Rs 4,910 a share after Jefferies gave a ‘buy’ recommendation with an upside of 17 percent. 

The company’s revenue climbed by 14 percent year on year, rising from Rs 8,434 crore in Q4FY23 to Rs 9,617 crore in Q4FY24. During the same time period, net profit increased by 16 percent from Rs 811 crore to Rs 943 crore. 

Ahead of this year’s festive season, Hero MotoCorp unveiled its planned to introduce the Xoom 125 cc and Xoom 160 cc scooters on May 8. The company experienced a surge in sales during the fourth quarter of FY24, with 13.92 lakh units sold compared to 12.70 lakh units in the same period of FY23. 

For the entire fiscal year FY24, the company achieved a total sales volume of 56.21 lakh units, marking an increase from 53.29 lakh units in FY23.

International brokerage,Jefferies initiated a ‘buy’ recommendation on company with a target price of Rs 5,650 per share, implying an upside potential of up to 17% from Fridays’ trading price of Rs 4,865. 

The brokerage report indicates a notable achievement as the company’s EBITDA per vehicle surged by 5 percent sequentially, hitting a record high. Despite acknowledging the company’s declining market share in two-wheelers and shifts in demand patterns, Jefferies underscores the potential for growth through success in premium bikes, scooters, and electric vehicles (EVs). 

Brokerage foresee a 17 percent EPS (earnings per share) CAGR (compound annual growth rate) over the period spanning FY24-26, maintaining an optimistic outlook on the company’s prospects within the two-wheeler sector, which they believe is positioned for double-digit growth in the coming three year. 

TVS Motor Company Ltd 

TVS Motor Company Ltd is engaged in the manufacturing of two-wheelers and their accessories. The company ranks among the top ten two-wheeler manufacturers in the world. 

The shares of India’s third-largest motorcycle manufacturer gained around 1 percent to high price of Rs 2,084 a share after Jefferies gave a ‘buy’ recommendation with an upside of 23 percent from Friday’s trading price. 

The company’s shares have delivered returns of 26 percent in six months and 66 percent in a year. 

The company’s revenue climbed by 25 percent year on year, rising from Rs 8,031 crore in Q4FY23 to Rs 10,042 crore in Q4FY24. During the same time period, net profit increased by 22 percent from Rs 336 crore to Rs 412 crore. 

The TVS iQube electric scooter is one of the fastest-selling two-wheeler electric vehicles.In Feburary 2024,iQube has helped TVS Motor become the No. 2 electric vehicle (EV) original equipment manufacturer (OEM) and achieve a 19% market share in the thriving Indian e-two-wheeler market. 

Jefferies initiated a ‘buy’ recommendation on TVS Motor with a target price of Rs 2,525 per share, implying an upside potential of up to 23% from Friday’s trading price of Rs 2,052. 

Jefferies emphasized the significant growth of the company’s Q4 EBITDA and recurring profit after tax (PAT), which surged 36-43% year-on-year, reaching unprecedented highs. Additionally, the EBITDA margin saw a sequential increase of 10 basis points, reaching 11.3%, while EBITDA per vehicle rose by 4% quarter-on-quarter. 

The brokerage firm anticipates that the company will experience substantial benefits from the resurgence in demand for two-wheelers in both domestic and export markets. Furthermore, an improvement in the franchise suggests potential for further expansion in margins. 

Based on TVS’ earning per share (EPS) has tripled over the past three years, the analyst predicts a more than doubling of EPS over the next three years. 

Moreover, the brokerage pointed out that the automaker’s management has indicated an exciting prospect for FY25 with numerous new launches planned. In the electric vehicle (EV) segment, the company intends to introduce multiple variants of iQube with various battery options tailored to consumer preferences. Additionally, it aims to unveil other EV models, including the highly anticipated 3W EV. 

Written by Omkar Chitnis

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