TVS Motor reported its highest-ever gross profit per vehicle. Indian 2-wheeler demand should recover from an abnormal cyclical trough. Exports are holding up well and margins should expand sequentially, Jefferies has said
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TVS Motor Company share price jumped almost 4 percent in the morning trade on July 30, a day after the company reported a consolidated net loss of Rs 15 crore for the first quarter ended June 30. It had reported a net loss of Rs 183 crore in the year-ago quarter.
The company’s total income increased to 4,692 crore in the first quarter as against Rs 1,946.35 in the same period of the financial year 2019-20, TVS Motor Company said in a regulatory filing. On a standalone basis, the company posted a net profit of Rs 53 crore during the first quarter.
It had reported a net loss of Rs 139 crore in the April-June period of last fiscal.
TVS noted that its overall two-wheeler and three-wheeler sales, including exports, stood at 6.58 lakh units in the June quarter against 2.67 lakh vehicles in the quarter ended June 2020.
Motorcycle sales were at 4.05 lakh units against 1.19 lakh units in the quarter ended June 2020.
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Scooter sales, on the other hand, rose to 1.4 lakh units from 0.82 lakh units in the year-ago period.
The company said it recorded its highest-ever two-wheeler exports in this quarter at 2.9 lakh units.
The stock was trading at Rs 583.60, up Rs 22.10, or 3.94 percent at 0923 hours. It touched an intraday high of Rs 589.60 and an intraday low of Rs 564.85.
Global brokerage firm Citi has maintained its “sell” call on the stock with the target at Rs 530 per share. The results were a positive surprise for the firm’s Q1 realisations, which drove slight EBITDA beat. Higher capital costs (depreciation+ interest) resulted in profit after tax miss.
TVS Motors’ pricing and gross margin trends have been commendable, it added.
Jefferies, however, maintained a “buy” call with the target at Rs 800 a share, an upside of 37 percent from the current level. “Q1 volume fell 29 percent QoQ, while EBITDA fell 49 percent QoQ, 6 percent below estimates. Gross margin fell just 40 bps QoQ despite severe commodity cost pressures,” it said.
“TVS Motor reported its highest-ever gross-profit-per-vehicle. Indian 2-wheeler demand should recover from an abnormal cyclical trough. Exports are holding up well and margins should expand sequentially. The company is also turning aggressive on electric vehicles,” it added.
Domestic brokerage and research firm Motilal Oswal has a “neutral” call on the stock with a target of Rs 625 a share. “The company’s volume growth is now falling in line with the domestic market, as the portfolio gaps have largely been filled but the ramp-up in exports supports overall growth. However, it is seeing benefit from economies of scale and operating leverage, resulting in EBITDA margins trending toward the double-digit range,” it said.
Valuations at 22.3x/17.1x FY22E/FY23E EPS largely reflect strong earnings growth as well as the increasing risk from EVs. “We maintain neutral call with target of Rs 625 (~18x Mar’23 EPS + Rs 32 for NBFC),” it said.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
