Synopsis: TVS Motor gained attention after Jefferies reaffirmed its positive outlook, citing strong operational momentum, improving profitability, healthy demand across key markets, and confidence that its premium valuation remains well supported.
The shares of this large cap company majorly engaged in manufacturing two-wheelers, three wheelers and its accessories with servicing and distribution of manufactured vehicles were in focus after the brokerage sees 25 percent upside potential
With the market capitalization of Rs. 1,85,645 Crores, the shares of TVS Motor Company Ltd were trading at around Rs. 3908 per share which is near to its its 52 week high of Rs. 3970 per share and is trading at a P/E of 53.7 whereas industry P/E stands at 37.7
Why Jefferies Believes the Premium Valuation Is Justified
Jefferies has retained its ‘Buy’ rating for TVS Motor and has raised its target price to Rs. 4,900, thereby creating an upside potential of 25 percent from its CMP and signaling its belief in the company’s future growth opportunities. The analyst house has also raised its earnings estimates for FY27-FY29 by 4-5 percent , with their forecast still standing above the Street estimates by 7-21 percent .
Strong Earnings Continue to Support the Growth Story
The firm noted that TVS Motor Company had delivered an impressive first quarter, recording a year-over-year increase of 40 percent to 41 percent in EBITDA and recurring profits after taxes, which was above their estimates by 4-7 percent. The results confirm the company’s strong performance in executing its operations for increased profitability.
Demand Momentum Remains Healthy
The brokerage expects strong demand in both the local and international markets for two-wheelers to boost TVS Motor Company. This is because the firm has an improved product mix and a better brand franchise which will boost market share and volume growth.
Margin Concerns Are Beginning to Fade
An additional important factor contributing to the bullish position is an improved margin profile. Based on Jefferies’ view, the margin headwinds have now passed their peak, implying that profitability will hold up despite the continued investment for growth by the firm.
Why the Premium Valuation May Be Worth Paying
While TVS Motor is trading at a multiple of 39x for FY27E, above its long-term average of 35x, Jefferies believes the stock merits a premium. This is on account of the company’s better earnings growth prospects, margin expansion, and favorable demand environment.
Conclusion:
Though trading at a premium to its usual valuation multiples, Jefferies thinks that TVS Motor’s impressive earnings trend, robust demand both in the domestic and exports business, better margin performance, and revised upwards estimates make it worthy of the valuation premium. The positive growth drivers are still present, and outperformance is still expected from the company.
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