TVS Motors Shares Soar After Q1: Buy, Hold Or Sell?

TVS Motors shares rose by more than 2% early on Tuesday after the company announced a 46% surge in its standalone net profit to ₹468 crore for the quarter ending in June, backed by impressive sales growth, improved margins, cost savings, and a diverse product mix.

What Happened? The Chennai-based vehicle manufacturer saw its revenue increase by 20% to ₹7,218 crore compared to ₹6,009 crore in the same period last year.

The company also reported its highest-ever operating profit (EBITDA) of ₹764 crore, marking a 27% growth for Q1 of the fiscal year 2023-24 against ₹599 crore during the same period in FY23. Moreover, its EBITDA margins improved slightly to 10.6%.

The firm's consolidated net profit rose by 42.2% to ₹434.3 crore from ₹305.37 crore in the same period last year, while its operational revenue increased by 23.8% to ₹9,055.5 crore from ₹7,315.7 crore last year.

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TVS Motor also witnessed growth in vehicle sales, which increased by 5% to 9.53 lakh units in the quarter ending in June 2023, compared to 9.07 lakh units during the same period the previous year. Notably, sales of the company’s electric scooters shot up significantly from 9,000 units in June 2022 to 39,000 units in June 2023.

What Do Analysts Say About TVS Motors? Nuvama Institutional Equities reported that TVS Motor surpassed expectations in Q1FY24 with revenue and EBITDA growing by 20% and 27%, respectively. The firm’s successful new products, scooter market strength, and market penetration in executive and luxury motorcycle segments drove this performance. Nuvama expects this trend to continue and maintain a “buy” recommendation with a target price of ₹1,510.

Motilal Oswal Financial Services noted TVS Motor’s consistent operating performance in Q1FY24, predicting the EBITDA margin to increase due to operational benefits and price hikes. However, they caution that TVS Motor’s heavy reliance on the domestic scooter sector makes it vulnerable to electric vehicle disruption. They maintain a “Neutral” recommendation with a target price of ₹1,300.

Price Action: TVS Motors Ltd. shares were trading 1.95% higher at ₹1,332.65 at 10 am on Tuesday.

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