Buy This 2-Wheeler Stock, Which Could Soar As It Prepares For Electric Vehicles

Emkay Global is bullish on the stock of TVS Motor Company and sees a significant upside of almost 25% from here on.

Recovery in domestic 2-wheeler industry

The domestic 2W industry is expected to see a recovery from FY23E, and premium motorcycles/scooters are likely to outperform ahead, according to Emkay Global.

"The export outlook is encouraging thanks to healthy demand in Africa and Latin America regions. We expect TVS Motor Company to see a 14% volume CAGR over FY22-24E, aided by a 16% CAGR in domestic 2-wheelers," the brokerage has said.

Focus on electric vehicles

TVSL has incorporated TVS Electric Mobility to undertake the e-mobility business. Under the PLI scheme, it will invest Rs 10 billion on product development and capacity expansion.

"Electric vehicle launches are targeted at segments such as premium scooters, high-performance sporty motorcycles, commuter space, delivery market and 3Ws. It currently has vehicle assembly capacity of 10,000 units/month, which is set to further increase in coming quarters. It sells iQube electric scooters in 33 cities and is planning to make the model available across the country. TVSL has also been investing in e-mobility firms such as Swiss E-mobility group, EGO Corporation and Ultraviolette," Emkay has said.

Price target of Rs 800 on the stock

Emkay Global says to buy with a target price of Rs 800 (unchanged), based on 23x Mar'24E EPS (24x Dec'23E earlier) and the value of TVS credit services at Rs 22 per share. "We lower the target multiple (based on two-stage DCF model) owing to an increase in debt assumptions. Key downside risks include delays in economic recovery, rising competitive intensity, further increase in commodity prices and adverse movement in foreign exchange rates," it has said.

Caution on the markets

Domestic Market has been witnessing heavy selling pressure post the Budget as the focus shifted back to interest rate, inflation, bond yields, and surging crude oil prices. "FIIs have sold more than Rs4000 crore last week. It is important for the market to sustain above the 17,000 levels to witness some stability in an otherwise volatile environment. The forthcoming RBI policy meet on 9-10 Feb'22 will be an important event to watch out for and can further increase volatility in the near term. Traders can continue with 'Sell on rise' strategy. The corporate earnings delivery is highly crucial and the Q3FY22 results so far has been decent providing some support to the markets," Says Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

Disclaimer

Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and his family do not hold shares in TVS Motor Company.