TVS Motor said it sold 8.35 lakh units in the December quarter as against 9.52 lakh crore in the year-ago quarter reflecting a weak demand scenario for two-wheelers.
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TVS Motor Company share price rose 7 percent in early trade on February 8 a day after the firm reported its December quarter earnings.
TVS Motor Company on February 7 reported a near 9 percent on-year rise in net profit at Rs 288.8 crore for the quarter ended December, which was above analysts’ estimate of Rs 246.7 crore.
The two-wheeler maker reported a 5.8 percent year-on-year increase in revenues to Rs 5,706.4 crore, which was also above Street’s estimate of Rs 5,488 crore.
TVS Motor said it sold 8.35 lakh units in the reported quarter as against 9.52 lakh crore in the year-ago quarter reflecting a weak demand scenario for two-wheelers.
However, weakness in volumes was more than offset by the impact of price hikes taken by the company. The price hikes helped TVS Motor report the highest ever quarterly operating profit of Rs 568 crore, up 11.2 percent on-year.
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Here is what brokerages have to say about the stock and the company after December quarter earnings:
CLSA
We upgrade the stock to outperform from underperform and raise target price to Rs 711 from Rs 656 as Q3 results are better than expected due to higher net realisation.
The revival in rural demand and premium motorcycle segment will aid recovery, while export demand is likely to remain strong.
The company is well positioned to gain in both domestic and export markets.
Jefferies
Jefferies maintained a buy call with a target at Rs 800 as the company is delivering good results in tough times.
Q3 volumes fell 11 percent YoY, but EBITDA and profit grew 9-11 percent YoY. Margin was flat QoQ while EBITDA/vehicle rose 5 percent QoQ to a new high.
Jefferies expects Indian 2-wheeler demand to recover from an abnormal trough.
The company has been gaining share across scooters, premium bikes and exports and is turning aggressive on EVS, expanding portfolio and capacity.
UBS
The brokerage house kept a buy call with a target at Rs 1,000 after an all-round beat in Q3.
The company is confident of sustaining profitability trends led by an improving mix.
E-mobility dominated management commentary and is well positioned to capitalise on trends of electrification and premiumisation.
Citi
The broking house has maintained a sell rating with a target at Rs 550 as the Q3FY22 results were ahead of estimates.
The management noted that price hikes and better mix boosted realisations and margin.
The company is most vulnerable to increasing competition in the EV space, while valuations provide little margin of error.
Macquarie
The broking firm has kept an outperform call with a target at Rs 810 after Q3 earnings beat led 40 basis point sequential margin expansion.
There was strong exports momentum and healthy pipeline for new launches.
Macquarie revised FY22 & FY23 earnings by less than 1 percent.
Also Read – TVS appoints Ralf Speth as chairman; Venu Srinivasan to continue as MD
Prabhudas Lilladher
We believe company will be able to sustain its growth and margin expansion led by (i) new product launches both on ICE (internal combustion engine) and electric platform (ii) exports sustaining the healthy momentum and (iii) cost reduction efforts and price hikes aiding margins.
We upgrade TVS to buy at revised target price of Rs 751 at 23x on Dec-23E EPS and Rs 34 for TVS Credit. We factor in EPS CAGR of 23% over FY22-24.
Motilal Oswal
Volume growth is likely to be driven by new product launches (Raider and Jupiter 125) in the domestic market as well as a ramp-up in exports.
The firm is enjoying benefits of economies of scale and operating leverage, resulting in EBITDA margin sustaining at double-digit level. However, the firm earns 40% of its overall EBITDA from the domestic scooter business, making it vulnerable to an EV disruption in the listed two-wheeler space.
Valuations at 23.4x/19.5x FY23E/FY24E EPS largely reflect its strong earnings growth as well as increasing risk of EVs. We maintain our neutral rating with a target price of Rs 625 (premised on 18x Mar’24E EPS + Rs 37/share for the NBFC).
Sharekhan
The firm has been increasing its share in both domestic and export markets, aided by a strong product portfolio. We remain positive on the two-wheeler industry, owing to strong demand prospects despite the fear of the third wave.
We expect the firm to be a key beneficiary of two-wheeler demand, given its aggressive new product launches across sub-segments.
EBITDA margin is expected to improve and remain sustainable at 10-11% going forward, driven by increasing share of premium products, operating leverage, and cost-control measures. Further, the company plans to create an EV subsidiary, which provides an opportunity for value unlocking for expansion of EV products and geographical reach.
We maintain our buy rating on the stock with an unchanged price target of Rs 803.
At 09:17 hrs TVS Motor Company was quoting at Rs 651.50, up Rs 14.70 or 2.31 percent on the BSE.
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