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In Q1FY25, TVS Motors registered in line performance on Revenue/EBIDTA/PAT front (VAR is +/-1%). Revenue under the quarter review improved by 16% YoY basis to Rs.83.75bn (vs est. Rs.84.4bn) supported by 1.7% YoY increase in ASP and 14.1% YoY volume growth. Operating profit jumped by 25.7% YoY to Rs.9.6bn vs est. of Rs.9.5bn and EBIDTA margin for the quarter expanded by 88 bps YoY/ 13bps QoQ to 11.5% vs est of 11.3%. Effort on reduction in RM to sales is commendable, despite increase in other expenditure and staff cost company able to manage the margin in upward direction. Management expects margin improvement to continue driven by cost reduction effort, product mix and geography presence. PAT increased by 23.4% YoY to Rs.5.77bn despite lower other income.

*  With a strong portfolio in MC, EV, and Scooter, management expects to do better than 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%. 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 Q2 and Q3. The new launch will be newer version of iQube and E-3W.

*  On the export front: The African market is expected to improve, the Middle Eastern market is performing well, and LATAM is doing better than the industry. The Asian market is anticipated to recover more slowly. In Europe, the company serves Italy through BMW and displays the TVS brand.

View & Valuation: TVS Motors is working on to make more launches in ICE+EV segment in 2W&3W in coming quarters with a aspiration to expand in international market particularly in EV segment. International market which is giving mix set of growth momentum is expected to stabilize in near to medium term. Management expect to perform better than industry by new product launches, increased in 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 quarters as well. We like to maintain our BUY rating on the stock with TP of Rs. 2,680 (valuing at 28x FY26 EPS + Rs.219 for TVS credit).

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