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Standing firm – reiterate as preferred bet among 2Ws

Valuation and View‐ Market share gains to persist

TVSL 4QFY22 were largely in‐line to our/street estimates. We reckon EBITDA margins at 10.1% is resilient given steep cost headwinds and volume weakness. The management remain confident on improvement in chips availability leading to increased supply of high in demand premium products such as Raider 125, Apache and Jupiter 125. Going forward, managementre‐iterated aggressive EVlaunches (in 5‐25kwh category both in 2W and 3W segments) likely over 7‐8 quarters with first product launch expected by June‐22. We believe TVSL is better placed among 2W OEMs both in ICE and EV product segments led by better product acceptability which should drive further market share expansion

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 10.2%/10.5% for FY23E/24E. TVSL currently trades at 23x/19x of FY23/24 EPS (v/s HMCL at ~15x/12.9x and BJAUT of 17x/14.5x). We believe it should continue to trade at a premium as we expect EPS CAGR of ~31% over FY22‐24E. 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 re‐iterate TVS as our preferred pick among 2W names with BUY and TP of Rs779 (v/s Rs789) with FY23/24 estimates tweaked marginally

Result Highlights – Margin continues to be resilient amidst tough time

Revenues grew ~4% YoY (‐3% QoQ) at Rs55.5b (in‐line) as ~8%/3% decline in volumes YoY/QoQ was offset by +12.5%/‐0.6% YoY/QoQ growth in realizations at Rs64.6/unit.  

Gross margins were flat QoQ (‐80bp YoY) at 23.8% (est 24%). Management expects commodity to peak out in 1QFY23 and RM inflation to soften from 2Q onwards.

Cost control benefit continued with employee/other exp declined ~4%/~3% QoQ. This resulted in EBITDA at Rs5.6b (in line, ‐2% QoQ) with margins at 10.1% (flat QoQ, in line with our/cons est).

Adj. PAT fell ~5% each YoY/QoQ at Rs2.7b (est Rs2.9b) led by higher interest cost at Rs330m (+18.3% QoQ, est Rs290m).

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