IGI Logo

Healthy performance; steady outlook

TVSL’s Q4 performance was characterized by sustained >11% margins with Volumes/Revenues/EBITDA/PAT growing ~22%/24%/36%/18% YoY. The domestic 2W industry growth continues apace, with rural recovery expected this yea,r aided by positive macros. TVSL continues to improve its positioning across categories in FY24; market-share gains in the fast-growing 125cc motorcycle category/scooters/exports stood at 610/90/60bps to ~15%/~25%/25.7%, respectively. Management is confident of outperforming the industry in domestic markets as well as exports, aided by new launches across the ICE and EV verticals. We trim FY25E-26E EPS by ~3.7/3.4%, owing to miss on margins in Q4FY24. We retain our BUY rating, with unchanged TP of Rs2,250/share (28x FY26E PER + Rs150/share for captive financing arm).

Margin performance weaker than expected

Revenue grew 24% YoY to Rs81.7bn, in line with Consensus, albeit missing our estimates on account of lower than expected ASP (flat QoQ). Volumes grew 22.4% YoY (flattish QoQ) to 1.06mn units. EBITDA grew 36% YoY to ~Rs9.3bn, (vs Consensus/Emkay estimate of Rs8.8bn/Rs9.7bn). EBITDA margin was flattish QoQ at 11.3% (flattish QoQ). On sequential basis, gross margins improved by ~90bps, though there was an increase in other expenses and staff costs, on percentage of sales basis. PAT grew 18% YoY to Rs4.8bn (Consensus/Emkay: Rs5.3bn/Rs5.7bn), coming in below estimates owing to lower than expected ‘other income’.

Earnings call KTAs

1) Management highlighted that positive macros, including expectations of a healthy monsoon, would aid the continued 2W industry growth this year, as also in rural markets. 2) Rural demand would be helped by improving activity levels and pickup in selfemployment levels. 3) Exports are expected to gradually recover; outlook for African markets remains challenging at the moment, with improvement seen H2FY25 onwards. 4) TVSL is confident of outperforming the industry in domestic markets as well as in exports, aided by new launches across the ICE, EV verticals. 5) Company expects share of scooters in 2Ws (ICEs and EVs) to increase across the 110cc and 125cc segments, propped by infrastructure development in urban as well as rural areas; 110cc will attract first-time buyers, whereas 125cc will aid transition to premium segments from the lowerend. 6) TVSL to expand product offerings in E-2Ws across price-points and battery capacity this year; would also introduce E-3Ws in FY25, as also for exports. 7) The industry experienced softening of commodity prices in FY24, with slight increase being seen in the current year; Company has taken price hike of 0.3% in Apr-24, to counter the same; efforts on further mix improvement, cost actions would help sustain the uptick in margins; for TVSL, EVs are currently contribution margin-accretive. 8) Financing levels stand at 56%. 9) FY25 capex/investments guidance: ~Rs10bn/11-12bn, respectively.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354