Accumulate TVS Motor Company Ltd For Target Rs.4,200 by Prabhudas Liladhar Capital Ltd
Strong Quarter with Prudent Cost Mitigation
TVSL reported strong Q1 numbers beating estimates. The management aims to outperform industry in both domestic and export markets with planned launches in Oct-Nov’26. It sees the scooter segment grow faster than overall 2W industry and EV penetration to further inch up, with overall international business growing strongly in FY27. TVSL will continue to invest behind brand, products and technology filling up white spaces, and keep outperforming the industry. Prudent cost reduction measures and calibrated price hikes should help mitigate the RM cost inflation amid geopolitical uncertainties and supply chain disruptions. We estimate volume/realization CAGR of 12.2%/5.9% over FY26-28E translating to revenue/EBITDA/APAT CAGR of 18.8%/20.6%/23.7%. Retain ‘ACCUMULATE’ rating with TP of INR4,200 (previously INR4,100), valuing the stock at 35x P/E based on FY28E EPS, and INR93 for TVS Credit Services Ltd.
Standalone op revenue at INR139.0bn (+37.8% YoY, +8.5% QoQ):
Realization was INR85.2k (+8.0% YoY, +3.8% QoQ). Gross margin stood at 27.2% (-160 bps YoY, -135 bps QoQ). EBITDA margin was 12.8% (+30bps YoY, -30 bps QoQ) beating BBGe/PLe by +85bps/+70bps respectively. EBITDA was INR17.8bn (+41.2% YoY, +5.9% QoQ) while adj. PAT of INR11.7bn (+51.4% YoY, +17.7% QoQ) beat BBG/PLe by +18.6%/+16.1%.
Topline and EBITDA to improve:
Commodity inflation in Q1 was ~3.5% QoQ with further 0.5% expected in Q2. TVS took price hikes of 1.5% in Q1 and 0.5% until now in Q2, which along with operating leverage, cost reduction and mix mitigated margin impact. While Q1 didn’t see any cost related to new launches, cost reduction actions will continue to be taken with calibrated price hikes without compromising on brand investments.
Please refer disclaimer at https://www.plindia.com/disclaimer/
SEBI Registration No. INH000000271
