Value Pick: Brokerages see up to 16% upside in TVS Motor amid healthy outlook, better business visibility

With the overall demand in the automobile sector picking up, several brokerages are bullish on this two-wheeler firm – TVS Motor Company shares and see an upside of up to 16 per cent in the stock price, as most of them set the target price between Rs 720-736 per share. 

The company had reported a 10 and 7 per cent surge month-on-month basis in the two-wheeler and three-wheeler segments to 2,94,401 and 15,036 units respectively sold in March 2022. 

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According to Varun Baxi Research Analyst at Nirmal Bang, “TVS reported volume that was broadly in line with expectation, but underlying demand continues to be weak in the domestic

market.” 

The shares of TVS Motor on Monday surged almost 1 per cent to Rs 633.7 per share on the BSE.

Axis Securities 

We expect the company's volumes to grow by around 9.5 per cent CAGR (Compound Annual Growth Rate) over FY21-24E and expect robust revenue/earnings CAGRs of 16/36 per cent over FY21-24E. 

Considering the new product launches and improving demand outlook for the company in domestic as well as international markets, we expect TVS to grow ahead of the industry over the next 2 years.  

We expect the company’s EBITDA margins to remain sustainable at current levels over the coming quarters on account of improving product mix, higher exports, and cost optimization measures.  

Amid better business visibility, an improving economic situation, and a healthy exports outlook, we remain positive on the stock over the medium to long term and recommend a Buy on the stock with a target price of Rs 720 per share, implying an upside of 14 per cent from the current market price. 

Geojit Financial  

Despite adverse commodity prices, strong cost control initiatives and price hikes aided margin upbeat. We expect confidence in the domestic market to recover gradually with the pick-up in economic activity and pandemic relaxations. The near-term impact may be elevated by input cost. 

Higher export and stability in the exchange rate are currently driving the international numbers. However, the long-term plan for the EV and its investment of Rs 1000 crore capex is on track for the company 

We roll over and value TVS’ standalone business at 20x FY24E EPS (Rs 707per share) to arrive at a target price of Rs.736 per share (16 per cent upside) while recommending Accumulate rating at the current market price. 

SMIFS Limited 

Strong Q4 outlook and way ahead with increasing domestic footfalls, new products pushing sales higher than the industry, gaining market share, exports well placed with an expansion of distribution and reach, back-to-back EV launches on cards, and aggressive push towards the EV development.  

On the margin side, TVS has shown its exceptionally superior operational capabilities over the period. Hence, better operating leverage, continued premiumization, higher sales from exports and rising 3W sales will continue to improve margins.  

TVS Motor’s execution capabilities, the appointment of the right person, and investment in the right company and time are what street like about the company. We recommend a Buy stance with target price of Rs 734 per share, which translates 16 per cent upside.