TVS Motor Company, a prominent player in the Indian automotive market, has faced a notable setback as its stock price dipped by 3.2% to ₹2,480 following the announcement of its Q2 FY25 results. Despite this decline, analysts remain cautiously optimistic regarding the company’s long-term outlook yet acknowledge the intensified competition in the electric vehicle (EV) sector, prompting several brokerages to adjust their target prices.
| Table of Contents |
|---|
| Q2 FY25 Performance Highlights |
| Market Dynamics and Competition |
| Brokerage Opinions and Target Price Adjustments |
| Conclusion |
Q2 FY25 Performance Highlights
TVS Motor Company reported a 13% year-on-year (YoY) increase in revenue, totaling ₹9,228 crore. This growth was largely driven by a 13% increase in two-wheeler sales, reflecting the company’s solid performance in the performance motorcycle segment.
| Key Financial Metrics | Q2 FY25 Value | YoY Change |
|---|---|---|
| Revenue | ₹9,228 crore | +13% |
| EBITDA | ₹1,080 crore | +20% |
| Profit After Tax (PAT) | ₹663 crore | +3.5% |
| Domestic Two-Wheeler Sales Growth | 15% | Compared to Industry Average of 11% |
Alongside the revenue growth, the company also experienced a 20% YoY increase in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) to ₹1,080 crore, benefiting from margin expansions and effective cost management. The net Profit After Tax (PAT) rose by 3.5% YoY, reaching ₹663 crore during this quarter.
Market Dynamics and Competition
The company’s growth trajectory appears robust in the domestic Internal Combustion Engine (ICE) segment, where it has successfully surpassed the industry’s average growth rate. There’s a promising outlook for new EV launches expected to further enhance market share. However, the EV sector is witnessing considerable competition, characterized by an influx of mass-market launches and enticing discounts aimed at boosting consumer adoption.
Moreover, the company’s subsidiaries are reporting increased losses, which remains a point of concern, especially outside of their core business units, aside from TVS Credit.
Brokerage Opinions and Target Price Adjustments
In response to the recent quarterly performance, several brokerages have reassessed their target prices for TVS Motor:
- Axis Securities: Adjusted its target price to ₹2,890 from ₹2,900, citing an expected Return on Capital Employed (ROCE) in the range of 23%-26% in the coming years, while highlighting the growing competition in the EV and mid-weight motorcycle segments.
- Jefferies: Maintained a ‘buy’ rating but lowered its target price to ₹3,270 per share.
- Kotak Institutional Equities: Stuck to a ‘sell’ rating but increased its target price from ₹1,800 to ₹1,850, pointing out that while TVS Motor exhibits strong medium-term potential due to its EV initiatives, high stock valuations pose concerns.
- Motilal Oswal: Held a ‘neutral’ stance, with a target price set at ₹2,160, citing issues within the motorcycle segment and a weak export outlook, especially in Africa.
Conclusion
Despite the Q2 FY25 results falling short of market expectations, analysts generally express a positive outlook on TVS Motor’s long-term growth potential. The company’s strong domestic sales performance and strategic initiatives in the EV sector are seen as vital drivers for future growth. However, with the backdrop of increasing competition and elevated valuations, revisions to target prices reflect a prudent approach by investors watching the evolving landscape of the automotive market.
FAQ
- What caused TVS Motor Company’s stock price dip after Q2 results?
- The stock price fell by 3.2% to ₹2,480 due to Q2 FY25 results not meeting market expectations, amid concerns regarding increased competition in the EV sector.
- How did TVS Motor’s performance look in Q2 FY25?
- TVS Motor reported a 13% YoY increase in revenue, with strong growth in two-wheeler sales and a 20% increase in EBITDA, while PAT grew by 3.5% YoY.
- What are analysts saying about the company’s future prospects?
- Most analysts maintain a cautiously optimistic view of TVS Motor’s long-term prospects, driven by domestic sales and EV initiatives, though they express concern over increased competition and high valuations.
