Broker’s call: TVS Motor (Buy)

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Target: ₹2,680

CMP: ₹2,574.80

In Q1FY25, TVS Motors registered in line performance on Revenue/EBIDTA/PAT front (VAR is +/-1 per cent). Revenue under the quarter review improved by 16 per cent y-o-y basis to ₹8,375 crore (vs est. ₹8,440 crore) supported by 1.7 per cent y-o-y increase in ASP and 14.1 per cent volume growth.

Operating profit jumped by 25.7 per cent to ₹960 crore vs est. of ₹950 crore and EBIDTA margin for the quarter expanded by 88 bps y-o-y/13 bps q-o-q to 11.5 per cent vs est of 11.3 per cent. Effort on reduction in RM to sales is commendable, despite increase in other expenditure and staff cost company able to manage the margin in upward direction.

Management expects margin improvement to continue driven by cost reduction effort, product mix and geography presence. PAT increased by 23.4 per cent y-o-y to ₹577 crore despite lower other income.

TVS Motors is working on to make more launches in ICE+EV segment in 2W&3W in coming quarters with a aspiration to expand in international market particularly in EV segment.  International market which is giving mix set of growth momentum is expected to stabilise in near to medium term.

Going forward recovery in the export market will also support healthy volume for the company. Further, cost reduction efforts will support the double-digit margin trajectory in the coming quarters as well.