Build up TVS Motor Company with a goal of Rs 1650: Satyendra Lilladher

 Build up TVS Motor Company with a goal of Rs 1650: Satyendra Lilladher

In its research report dated October 30, 2023, Prabhudas Lilladher suggested an add rating on TVS Motor Company with a target price of Rs 1650.

The TVS Motor Company study report by Prabhudas Lilladher

We adjust our FY25/FY26E EPS projections by 1%/6% to account for improved margins since scale benefits and PLI will balance the effect of a greater EV mix. The 2QFY24 performance of TVS Motor (TVSL) was essentially in line with the effect of bad mix (EV volumes +49% QoQ), which was somewhat mitigated by cost reduction and inventory management. Along with gaining market share, the firm drastically increased the amount of EVs it produced. It now intends to introduce a number of goods into the local market and export EVs abroad. Rural demand is anticipated to rebound, but urban demand for the sector was robust and should persist. Despite a larger percentage of EVs, EBITDA margins increased c50bp QoQ to 11% because to inventoryisation. As the firm continues to engage in advertising and the advantage of inventorization reverses, we anticipate that margins will stay below current levels in 2HFY24E.

Prospects

Given (1) strong demand for new product launches in the ICE and EV segments; (2) a greater emphasis on exports and premiumization; (3) margin improvement aided by cost control; (4) operating leverage; (5) benign input prices; and (6) PLI benefits to likely offset impact from higher EV mix, we believe TVS is well-positioned to outperform the industry. Retain "ACCUMULATE" at 27x Sep-25E EPS incl. Rs66 for TVS credit (previously Rs. 35) and TP of Rs. 1,650 (previous TP of Rs. 1,560).