TVSL is turning more aggressive on electric vehicles and plans to launch new electric 2-wheelers and 3-wheelers over the next two years. Company’s iQube order book currently stands at around 6,000 units.
TVS Motor Company (TVSL) shares fell over 2% per cent to on Monday Rs 609 amid market sell-off. Despite the 5% correction in the last five days, Axis Securities is bullish on stock and is expecting TVSL shares to rally in near-term on account of increasing business visibility, improving economic situation, and healthy exports outlook, according to analysts. The 3rd largest two-wheeler company in India will grow ahead of the industry over the next 2 years, said Axis Securities in its report. The firm has been increasing its share in both domestic and export markets, aided by a strong product portfolio. TVS Motor company stock has moved merely 0.35% higher in a year, however, the stock may rally 14% going forward.
Company Talk: Increasing exports, EV launches, improving demand outlook to drive growth
Market share rising in domestic, overseas markets: Leveraging its strong product portfolio, TVS Motor Company has gained market share in both scooters and premium motorcycles segments. Its market share in scooters has improved to 21% (9MFY22) from 15% in FY17, and in the premium (125cc+) motorcycles segment, it has risen to 19% from 11% over the same period. The company is also doing well in the overseas markets with its share in India’s 2-wheeler exports rising to 24% in 9MFY22 from 16% in FY17 and share in 3-wheeler exports rising to 32% from 21% in FY17.
Outperformance to continue on volume front: While analysts at Axis Securities expect the domestic 2-wheeler industry to recover gradually, they believe TVSL’s outperformance will continue on the volume front. Furthermore, rising exports at a better exchange rate would help the company on the margin front. “Richer product mix coupled with superior pricing power and increasing exports would support its double digit margins. Also, improving franchise has helped the company improve its margins in the period of intense commodity cost inflation,” the brokerage said. Moving forward, the company expects to sustain higher volume and margins owing to the success of new products, cost rationalization initiatives, and its improving brand equity.
Entry of investors in the EV subsidiary can drive value: TVSL is turning more aggressive on electric vehicles and plans to launch new electric 2-wheelers and 3-wheelers over the next two years. Company’s iQube order book currently stands at around 6,000 units and the model is available in 33 cities across the country. Additionally, it has got orders for 2,000 e-3Ws from CESL. It also has plans to launch EV three-wheelers soon. The company will strengthen its EV portfolio over the coming quarters. It has earmarked investments worth Rs Rs 1,000 crore for products and capacity expansion. “Potential entry of strategic or financial investors in the EV subsidiary can drive further value unlocking for the company,” the brokerage said.
EBITDA margins to remain sustainable over coming quarters: Analysts at Axis Securities expect TVSL’s volumes to grow by ~9.5% CAGR over FY21-24E. “We expect robust revenue/earnings CAGRs of 16%/36% over FY21-24E. Considering the new product launches and improving demand outlook for the company in domestic as well as international markets, we expect TVSL to grow ahead of the industry over the next 2 years. Company’s EBITDA margins to remain sustainable at current levels over the coming quarters on account of improving product mix, higher exports, and cost optimization measures,” they said.
TVS stock rating: BUY
Target price: Rs 720
Axis Securities has a ‘Buy’ rating on the stock with a target price of Rs 720 per share, implying an upside of 14% from the current market price. The brokerage further stated that considering the better business visibility, improving economic situation, and healthy exports outlook, the outlook on the stock is positive over the medium to long term.
