Buy TVS Motors ; target of Rs 1275: Prabhudas Lilladher

Prabhudas Lilladher's research report on TVS Motors

TVS’ revenue at Rs 72.2bn (+20% QoQ) came 5% ahead our estimates led by better-than-expected ASPs (Rs 70.2k, +6% QoQ) on the back of improved volumes for premium bikes and price hikes. However, EBITDA margin at 10.2% (+20bps QoQ) came 50bps lower than our estimates owing to higher marketing spends for Ronin/i-Qube and ad spends during the festive season. Management remains confident of growing ahead of the industry as semiconductor availability is now largely sorted out. Demand for i-Qube remains robust and TVS aims at average monthly volumes of 10k by Dec-22 (8.1k in Oct-22) and 25k by Mar-23. Management highlighted strong product pipeline for ICE and EV models. We believe TVS will be able to grow ahead of the industry and sustain its momentum, led by (1) new product launches in ICE & EV segments along with its revamped product portfolio (2) strong exports and premiumisation and (3) margin protection through cost reduction efforts and price hikes.

Outlook

We raise our estimates by 9% each for FY24/25 and target multiple to 26x (24x earlier) to factor in strong 2Q performance and improved outlook. Maintain BUY, with a TP of Rs 1,275 at 26x Sep-24E EPS and Rs 33 for TVS credit