TVS Motors Jumps 5% on Strong Earnings, Outlook, Shares Soar 5%

TVS Motors shares hit a 52-week high following the release of Q4 results, with shares up more than 5%.

Shares of TVS Motor Company rose more than 5% on May 5 after the company reported better-than-expected earnings and a strong outlook.

The stock was trading at Rs 1,228 on the BSE at 9:30 am, up 5% from its previous close, while India’s benchmark Sensex fell 0.5% to 61,419.

The Chennai-based company reported a 50% jump in its stand-alone net profit to Rs 410.3 crore for the quarter ended March 2023, from Rs 274.5 crore a year ago. The increase in profits can be attributed to the success of premium products, more readily available chip supplies, and lower commodity prices.

Operating income rose 19.4% to Rs 6,604.8 crore, while EBITDA increased 22% to Rs 680 crore from Rs 557 crore a year earlier. EBITDA margin expanded 20 basis points quarter-on-quarter to 10.3%, despite lower exports and higher EV sales. Total sales of two- and three-wheelers, including exports, were 868,000 in the quarter, compared with 856,000 a year ago.

“Despite a modest increase in raw material prices in Q1FY24, margins are likely to remain stable next quarter as it should be offset by roughly 2% price increases (including a 1% increase to cover OBD-2 related costs),” Motilal Oswal said in its report. The brokerage reiterated its “neutral” rating and kept its target price at Rs 1,060 from the last close.

Kotak said the company’s profitability improved slightly due to RM tailwinds. However, it believes that competitors’ rapid adoption in the electric vehicle space and aggressive pricing strategies will seriously affect the demand and profitability of ICE scooters.

Also, the launch of the Hunter 350 and the limited success of the Ronin in the domestic market (due to pricing issues) may affect demand for the company’s premium motorcycle division. The brokerage maintained its “sell” call on the stock and its target price at Rs 875 per share from Rs 830 earlier.

TVS reported that the urban market showed a positive trend, while the rural market remained weak and heavily dependent on the upcoming monsoon season. However, TVS management remains optimistic and expects TVS to outperform domestic and export markets.

Due to multiple factors, such as a weak macro environment, local currency depreciation, and limited foreign exchange supply, TVS’s export volume fell sharply in the fourth quarter, down 41% year-on-year. However, despite the drop in exports, TVS reported that retail sales had outpaced wholesale sales, and the company expects shipments to improve going forward.

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