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TVS Motors during the quarter registered a largely in line performance on revenue and margin front whereas misses in profit front due to negative one off other income. Revenue under the quarter review improved by 23.7% YoY basis to Rs.81.68bn (vs est. Rs.80.4bn) supported by 1.1% YoY increase in ASP and 22.4% YoY volume growth. Operating profit jumped by 36% YoY to Rs.9.26bn vs est. of Rs.9.12bn and EBIDTA margin for the quarter expanded by 105 bps YoY/ 13bps QoQ to 11.3% vs est of 11.4%. Management expects margin improvement to continue to improve driven by cost reduction effort and product mix. PAT was increased by 18.3% YoY to Rs.4.85bn due to negative other income on account of notional loss of fair valuation of investments.

§With a strong portfolio in MC, EV, and Scooter management expects to outperform the industry in both domestic and international markets. In the Domestic Market, the entry-level segment in the rural market is showing some sign of improvement along with increase in traction in the premium category. As far monsoon prediction is normal we expect back to back better monsoon will help to uplift the rural market which will ultimately support the broad based recovery in 2W. Further in the 2W segment scooter segment is getting traction due to its utility and improving road condition in the rural market. TVS with a decent size of scooter exposure will be the primary beneficiary for this trend. Share of rural market for TVS is around 40-45%. and financing penetration is around 56%.

§EVA portfolio: Company is ready with 2-3 products in 2W and 3W segment and expected to launch the new product in next few months. The new launch will be newer version of Qcapital and E-3W. Further post reduction in FAME-II subsidy new EV product launch will be based on market demand and value for money.

§On the export front- The African market is facing currency depreciation issues and Africa market to be muted in the first half of FY25. LATM and Asian markets are performing well. Management expects the worst for these markets is largely over, but the Red Sea issue may trigger some container shortages in the near term.

View & Valuation: 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). Going forward recovery in the export market will also support healthy volume for the company. Further, cost reduction efforts will support the double digit margin trajectory in the coming quarter as well. We like to maintain our BUY rating on the stock with TP of Rs. 2,136 (valuing at 28x FY26 EPS + Rs.75 for TVS credit).

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