Buy This Motor Stock: Focussed On EV Space, Revenue Up To Rs. 60bn, New Launches lined Up: Emkay Global

Reputed brokerage firm Emkay Global recommends investors to buy the stocks of TVS Motor. The company is aggressively focusing on the EV space, with multiple launches lined up in 2Ws/3Ws in the next two years, R&D collaboration with BMW and investment in electric bike maker Ultraviolette. Additionally, it has lined up a series of launches in 5-25KW categories in the next 2 years, targeted at segments such as premium scooters, high-performance sporty motorcycles, commuter space, delivery market and 3Ws. Apache is the company's high-end popular brand.

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of TVS Motor is Rs. 868. Emkay Global has estimated a Target Price for the stock at Rs. 1000. This stock has the potential to give 15.30% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 43,140 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 868
Target Price	Rs. 1000
Potential 1 year return	15.30%
52 week high share price	Rs. 953.20
52 week low share price	Rs. 495.00

The company's revenue grew by 9% qoq to Rs. 60.1bn. Volumes grew by 6% and realization grew by 3%. Q1 EBITDA grew by 8% qoq to Rs. 6bn, slightly above estimates. EBITDA margin has sustained around 10% for the last four quarters despite cost pressures and supply constraints, thanks to improving mix and cost savings.

Emkay Global says: Why Should You Buy This Stock?

"We retain our view of a turnaround in the domestic 2W industry, and TVSL should gain share due to its lower exposure to entry-level motorcycles. Volume performance should be supported by the reopening of offices/educational institutions, better finance availability, pick-up in rural sales and a favorable base effect. Led by a recovery in domestic 2W volumes, we expect a 12% CAGR in total volumes over FY22-24E. We increase FY23/24E EPS by 5%/3% to Rs. 29.1/Rs. 36.5 due to an increase in margin assumptions and Other income. Our positive stance is underpinned by expectations of a cyclical upturn in domestic 2Ws and positive growth in exports, market share gains in domestic and overseas markets, and margin expansion emanating from rising economies of scale, commodity deflation and cost-cutting measures," the firm mentioned.

However, key risks are lower than expected demand in key geographies, increase in competitive intensity, failure of new products, and further increase in commodity prices and adverse currency rates.

Company portfolio: TVS Motor

TVS Motor Company is the third largest 2-wheeler company in India with a revenue of over Rs. 18,217 crore (over US$2.9 billion). It has an annual sale of more than 3 million units and an annual capacity of over 4.95 million vehicles. TVS Motor is also the 2nd largest exporter in India with exports to over 60 Countries. The company manufactures the largest range of 2-wheelers, starting from mopeds, to scooters, commuter motorcycles, to racing inspired bikes like the Apache series and the RR310. The company expects to increase production from ~4,500 units in Jun'22 to 10,000 units, and then to 25,000 units in the coming months. It sells iQube electric scooters in 85 cities and is planning to make the model available across the country. It is also evaluating a stake sale in the E-mobility subsidiary.

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.