TVS Motor Company Stock Performance and Future Outlook

In the latest trading session, TVS Motor Company experienced a notable decline in its share price, dropping by up to 5% during intraday transactions. This dip followed the release of their Q4 earnings, which revealed a remarkable 76% year-over-year increase in net profit, reaching ₹852 crore. The growth was primarily driven by strong sales in the electric vehicle (EV) segment, alongside a 17% rise in revenue. Here’s a closer look at the factors influencing TVS Motor’s stock and the outlook ahead.

Strong Q4 Earnings Performance

TVS Motor’s Q4 EBITDA (earnings before interest, taxes, depreciation, and amortization) demonstrated significant growth, climbing 27% year-over-year. According to Jefferies, this performance aligns well with their expectations, excluding previous quarter PLI (Production-Linked Incentive) incentives. The company’s sales volumes saw a 14% increase, while the average selling price rose by 3% compared to the previous quarter. Notably, the EBITDA margin improved by 60 basis points, reaching a record high of 12.5%.

Domestic Demand Challenges but Optimism for Recovery

While the two-wheeler industry faced challenges, with FY25 sales still 6% lower than those in FY19, there has been a 15% compound annual growth rate (CAGR) in wholesales from FY22 to FY25. This growth comes after a 35% decline in two-wheeler volumes between FY19 and FY22. Although demand has softened recently, TVS anticipates a normalization in growth, with expectations for 8% year-over-year growth in FY26. Factors such as income tax reductions, easing liquidity, and wage increases for public sector employees in FY27 are expected to bolster demand.

Steady Export Growth

India’s two-wheeler export volumes surged by 21% in FY25 following a 22% decline in the previous two years. Despite being 6% lower than FY22 levels, TVS remains optimistic about the export market, particularly with anticipated growth linked to a recovery in Africa. Jefferies projects an 11% CAGR for India’s two-wheeler exports from FY25 to FY28, although global economic uncertainties present potential risks.

Market Share Expansion

In an evolving market landscape, TVS has successfully increased its domestic two-wheeler market share to an impressive 18%, marking an 18-year high. Between FY14 and FY25, the company has captured 21% of the electric vehicle market and doubled its shares in both motorcycles and internal combustion engine scooters, showcasing its competitive edge.

Enhancing Profit Margins

TVS Motor has steadily improved its EBITDA margin from an average of 6.4% during FY10-17 to 12.3% in FY25, with estimates suggesting further growth to 14% by FY28. This increase is attributed to the company’s growing pricing power amid rising demand. Jefferies anticipates a 13% increase in sales volume and a 24% growth in earnings per share (EPS) from FY25 to FY28, with EPS estimates for FY26-27 projected to be 4-10% higher than market expectations.

Investment Outlook

Jefferies has issued a Buy rating for TVS Motor Company, setting a price target of ₹3,300, indicating an 18% upside potential from the current share price, which closed near ₹2,700. As the company navigates current market conditions, the outlook appears promising, reinforced by robust earnings and strategic growth initiatives.

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