TVS Motor outperforms industry growth in festive season but Jefferies cuts target price — Here’s why

TVS Motor Company shares swung between the red and green on October 24, a day after the two-wheeler maker reported its financial results for the July to September 2024 quarter. Even as the company’s revenue and profit jumped to its highest ever, the result was below CNBC-TV18 estimates across parameters.

Following the Q2 results, global brokerage firm Jefferies retained its ‘buy’ call on TVS Motor stock but cut the target price to ₹3,270, which still implies a potential upside of 27% from the closing price of October 23.

Jefferies also noted that the firm’s Q2 EBITDA or earnings before interest, taxes, depreciation, and amortisation grew 20% year-on-year but was 4% below the brokerage’s estimates. EBITDA margin rose 20 basis sequentially.

TVS Motor expects domestic two-wheelers to grow 7-8% in Q3 with the company growing faster than the industry, the brokerage noted, and added that it believes the firm should be a beneficiary of two-wheeler demand revival in domestic and export markets.

It also said that an improving franchise should drive continued margin expansion for TVS Motor.

Jefferies has cut the FY25-27 earnings per share (EPS) estimate by 3-4% but still expects it to more than double over FY24-27.

Brokerage firm Nuvama has also retained its buy call on the stock and set the target price at ₹3,200.

“We are building in strong growth prospects led by the ongoing upcycle in 2Ws, market share gains in domestic/overseas and aggressive EV focus. Overall, we reckon revenue/EPS CAGR shall be 13%/26% over FY24–27E,” the brokerage said.

It added that TVS Motor has been gaining share in domestic and overseas markets, and the brokerage expects its domestic share to rise from 17% in FY24 to 18% by FY27.

The remarks come after the company’s concall later in the day after Q2 results. TVS Motor said that in the nine days of Navratri, the industry saw 11% growth but the firm did much better than the industry though post Navratri there was some slowdown.

Till now, the festive season growth for the industry at 4% YoY, whereas the firm outperformed. The two-wheeler maker expects a positive momentum in the upcoming Diwali festive season.

The firm added that it expects an improvement in performance in Q3 and will continue to outperform the industry which is likely to grow at 7-8% in the quarter. It also projected its margin to improve in the coming quarters.

The company noted that Africa is its biggest export market, forming 57% of exports. “We have seen the bottom for Africa, it is likely to grow now.”

Meanwhile, about what impacted imports in Q2, the firm said, the Red Sea crisis continued. The firm has started exports to LATAM and anticipates good traction. On the other hand, the Middle Eastern market is performing well, while challenges persist in Bangladesh. Nepal and Sri Lanka are expected to perform well, it added.

TVS Motor also said that more EV launches are expected in the second half of FY25.