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Well placed with EV focus gaining momentum

Valuation and View

TVSL 3QFY22 were in‐line across parameters to our estimates while EBITDA/PAT were higher by ~8%/9% to street. The record ASPs at Rs65k/unit (led by price hikes, product mix and currency gains) and sustained cost control led to flat QoQ EBITDA margins at 10% (v/s ~70bp decline in BJAUT’s margins). Hence, EBITDA/vehicle at Rs6.5k/unit too were at record levels. This we believe is expected to sustain ahead due to 1) price hikes in domestic and exports, 2) cost control, 3) premium focus.  

EBITDA margins over last few quarters (ex of 1Q) have been strong at ~10% despite multiple headwinds. With volume recovery over low base, we expect margins to expand by 80bp/30bp at 10.3%/10.6% for FY23E/24E. TVSL currently trades at 22.7x/18.9x of FY23/24 EPS (v/s HMCL at ~14.8x/12.8x and BJAUT of 16.7x/14.5x). We believe it should continue to trade at a premium as we expect EPS CAGR of ~38% over FY21‐24E. EV focus continues to intensify with more capex/investments towards the same. We believe sustained market share gains in domestic EV 2Ws led by aggressive product pipeline, scope of external investments in to EV vertical and NBFC TVS credit are additional re‐rating triggers. We therefore retain BUY with TP of Rs759 (v/s Rs760) with FY23/24 estimates largely remaining unchanged. 

Result Highlights – Record ASPs drive healthy earnings

Revenues grew 5.8% YoY/1.5% QoQ at Rs57.1b (est Rs55.7b/street Rs55.3b) as ~6% QoQ increase in ASPs at ~Rs65k (est Rs63.5k) were partly offset by ~4% QoQ decline in volumes at 878,659 units. Record ASPs were driven by price hikes, premium product mix and currency gains in exports

Gross margins declined ~40bp QoQ to 23.7%. However, this was partially offset by ~1.1% QoQ price hikes in domestic as well as exports markets.

EBITDA grew 11.2% YoY (+1% QoQ) at highest ever Rs5.7b (in‐line, street Rs5.2b), with margins remaining flat QoQ at 10% (in‐line, street 9.5%). Management believe to record margins of over 10% in 4QFY22 as well.

Adj PAT grew 8.5% YoY (~4% QoQ) to Rs2.9b (in‐line, street Rs2.6b).

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