TVS Motor Company (TVSL) continued to move up the profitability curve. The company delivered yet another quarter of record margin at 11.7% (vs. consensus 11.8%), up 65bps/25bps YoY/QoQ despite the EV mix increasing 70bps/130bps in Q2FY25 (EV revenues ~10% in H1). TVS expects rural demand to recover, and it expects to see 7–8% industry growth in Q3. We believe, TVS has the capability to deliver 12–12.5% EBITDAM in FY25–26E, despite e2W scaling in excess of ~30k units/month with 10% CAGR in overall volume in FY24–26E.
OutlookHowever, TVSL’s stock (up ~70%) has outperformed the Nifty index (up ~27%) over the last one year, reducing its upside. Accordingly, we downgrade TVSL to HOLD, from Add, with a DCF-based unchanged TP of INR 2,596, implying 30x FY26E standalone EPS.
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