Shares of TVS Motor Company rose nearly 6 per cent on Tuesday following an encouraging first quarter performance and optimism that the company will be a key beneficiary of demand revival in domestic and export markets. The stock ended the session at Rs 1,381, up 5.7 per cent over its previous close.
The two-wheeler manufacturer on Monday posted its highest-ever profit before tax (PBT) of Rs 610 crore, growing 41 per cent year-on-year (y-o-y). Profit after tax (PAT) during the current quarter grew by 46 per cent y-o-y at Rs 468 crore. The company’s net profit in the previous preceding quarter stood at Rs 410 crore.
Analysts said the company’s improving franchise provides headroom for margin expansion.
“TVS’ export volumes fell 33 per cent Y-o-Y in 1Q but have already started improving sequentially (up 23 per cent quarter-on-quarter (QoQ) from 4Q trough). TVS said that retail in export markets have also been rising sequentially and should normalise in 2H,” said a note by Jefferies.
The note added that after a long period of subdued margins, TVS is narrowing the gap with peers.
“Its EBITDA margin has improved from an average of just 6.4 per cent in FY10-17 to 10.1 per cent in FY23 and 10.6 per cent in 1QFY24; we expect 11.1-11.9 per cent in FY24-26E as volumes recover, and improving franchise drives better pricing power,” said the Jefferies note.
A note by Nomura said further upside could come from a more robust revival of the two-wheeler industry (domestic and exports) on a low base, additional market share gains and higher electric vehicle volumes.
The note, however, mentioned continued significant investments or losses in subsidiaries that might impact cash flows and multiples as a potential headwind.
First Published: Jul 25 2023 | 7:05 PM IST