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In Q2FY24, TVS Motors registered an in-line performance on the revenue front however disappointed on the margin front. Revenue for the quarter grew by 12.8% YoY to Rs.81.44bn (vs est. Rs.81.9bn) driven by 6.5% YoY increase in ASP and 5.9% YoY volume growth. EBIDTA for the quarter jumped by 22.2% YoY to Rs.8.99bn vs est. of Rs.9.55bn. Despite sharp increase in other expenditure, margin expanded by 85bps YoY/47bps QoQ to 11%. Benefit of lower RM cost partially offset by jump in other expenditure. Premiumization, material cost reduction, scale benefit and product mix helped to improve the margins. The company didn’t took any price increase in the last one month and expect material cost to remain at a comfortable level. PAT jumped by 31.7% YoY to Rs.5.36bn.

* During the Dussehra period, TVS outperformed the industry, with stronger performance in urban markets over rural ones. Further, management expects better Diwali sales season compared to last year. The inventory was high due to stock filling in the channel, however post festive season management expect to keep inventory less than a month.

* EV Portfolio Update: Post the successful launches of E-2W, the company is exploring to expand the E-2W channel in the international market. The i-qube e-scooter achieved significant milestone, crossing 2 lakh sales volume and increasing production to 25,000 units per month. Company also expects to launch new EVs in the 5-25 kW range. E2W is now available to 337+ cities and expected to expand to 600 cities by year end.

* View & Valuation: So far festive season has demonstrated the positive growth and despite reduction in FAME-II subsidy E-2W sales are also growing at decent pace. Further impact of uneven rain in various parts of the country has not impacted the overall spending, which was largely offset by increased infrastructure and manufacturing activity across the country. TVS Motors has positioned itself in a better place to reap this opportunity by better product offering, new product launches, customer reach and aggressive network expansion for E-2W ( with new EV launches). Moreover stable RM process in near to medium term will support the double digit margin delivery. We introduce and roll forward our valuation to FY26E EPS to arrive at a TP of Rs. 1,786 (valuing at 26x FY26 EPS + Rs.36 for TVS credit) and recommend ADD rating on the stock.

Quarterly performance

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