Accumulate TVS Motor Company; target of Rs 2179: Prabhudas Lilladher

Prabhudas Lilladher's research report on TVS Motor Company

TVS Motor’s (TVSL) 4QFY24 up by 23.7% YoY, led by ASP expansion of 1.1% YoY/2.6% QoQ as volume growth was 22.4% YoY. Revenue growth was 1.8%/2% better than PLe /BBGe respectively. EBITDA grew by 36.3% YoY with a margin expansion of 105bps YoY to 11.3%, led by better operating leverage and softer commodity prices. EBITDA was in line with our estimate while it was 2.1% higher than BBGe whereas margin was in-line with PLe/BBGe. Going ahead, the management aims to increase the offering for iQube and increase distribution reach for its premium segment bikes. In our view, TVSL will continue to deliver healthy growth given (1) sustained demand for its new product launches (2) consistently improving export geography to aid in volume expansion in both 2W & 3W segment and (3) E3- Wheeler launches to aid in market share gain. We forecast its domestic/export volume to grow at a CAGR of 9.7%/15.8% over FY24-FY26E, factoring this we estimate its revenue/EBITDA/APAT to grow at a CAGR of 14.3%/20.8%/22.6% over the same period.

Outlook

Given the healthy growth outlook, we upgrade our rating from ‘HOLD’ to ‘ACCUMULATE’ with a TP of Rs 2,179 (including Rs 69 for TVS credit), valuing it at a PE of 32x on its FY26E EPS.