Sharekhan Suggest Buy This Auto Sector Large-Cap Stock For 30% Upside, Sees Robust Growth Potential

CMP, Target Price, Performance, 52 Week Low & High, Return

TVS Motor today opened at Rs 750.45, and closed at Rs 749.90, after a fall of 0.19%. Its 52-week low is Rs 495 per share, whereas, the 52-week high is Rs 813.95/share. The current share price of the TVS Motor is Rs almost Rs 254.9 above its 52-week and Rs nearly Rs 64.05 below its 52-week high.

The stock on investment has given continuous positive returns over the last 5 years. It have 0.79% in last 1 week, 18.16% in month, 26.62% in 3 months, 19.15% in 1 year, 61.79% in 3 years, and 37.12% in 5 years. It has given the highest positive returns in 3 years on investment.

Considering the brokerage's given the targeted price of Rs 900 and the CMP, the stock could jump nearly 20%.

The company expects FY23 to be a better year for the industry, as it expects rural demand to pick up strongly. The company continues to ramp up its investments in electric vehicle (EV) and connected technology over the past few quarters.

The brokerage stated in the report "Earnings growth is expected to witness a robust 33.4% CAGR during FY2022-FY2024E, led by 15.5% revenue growth and a 100-bps expansion in EBITDA margin, with RoE to sustain at over 20%."

 

FY22 - A year of challenges and hopes

FY22 was marked by the second wave of the COVID-19 pandemic, supply chain disruptions and a strong upcycle of commodity prices increased. Despite these serious impediment, TVSM performed better than the industry in FY22, through market share gains, product launches and cost cuts, while improving EBITDA margin to an all-time high in double-digits during the last three-quarters of FY22.

Electric vehicles remain the prime focus

TVS Motors is ramping its investments in EVs and connected technologies through multiple routes - investments in R&D and auto technology start-ups. The management expects its EV capacity to improve to 10,000 units/month by January 2022 versus the current capacity of ~1,000 units/month. The company is expanding its distribution network to 33 cities by end-FY22. The company is also creating a separate subsidiary for the EV business to increase focus, flexibility and investments.

Strengthening exports and international business

Sharekhan said, "We expect TVS Motors to continue to perform strongly and gain market share in exports and international markets, driven by its wide and strong product portfolio and offerings and its focus on new product launches and entering new countries. TVS Motors's business in Bangladesh and other South Asian countries are improving from the impact of COVID-19."

Sharekhan Maintain Buy with a revised Target Price of Rs. 900

TVS Motors has been increasing its market share in both domestic and export markets, aided by a strong product portfolio. "We remain positive on the two-wheeler industry, owing to strong demand prospects despite the fear of the third wave of COVID. 2Ws are a more affordable choice for buyers as they prefer personal transport over public transport on safety concerns post the pandemic. Moreover, increased focus on premium and EV products provides ample room for growth in Indian and export markets. We expect TVS Motors to be a key beneficiary of two-wheeler demand, given its aggressive new product launches across its sub-segments. EBITDA margin is expected to improve and remain sustainable at 10-11% going forward, driven by increasing share of premium products, operating leverage and cost-control measures. Further, the company plans to create an EV subsidiary, which provides an opportunity for value unlocking for expansion of EV products and geographical reach. The company's stock trades below its historical average at a P/E multiple of 22.1x and EV/EBITDA multiple of 12.1x its FY2024E estimates. We maintain a Buy rating with a revised price target of Rs. 900, " the brokerage has said.

The brokerage also commented on the key risks, and said, "Geopolitical tensions can adversely affect commodity prices and supply constraints. Rising raw material prices may pose a threat to profitability if commodity prices continue to rise for a longer period."

About - TVS Motors Company Ltd.

TVS Motor Company Ltd. is a Large Cap Auto sector company having a market cap of Rs 35,611 Crore. TVS Motor Company the flagship company of TVS Group is the third-largest 2-wheeler manufacturer in India. The company manufactures a wide range of 3-wheelers/3-wheelers from mopeds to racing inspired motorcycles. The company has an annual production capacity of 4 million 2-wheelers & 120000 3-wheelers. It is one of the leading two-wheelers and three-wheeler exporters from India distributing to over 60 countries. The company has manufacturing plants located at Hosur in Tamil Nadu Mysore in Karnataka and Nalagarh in Himachal Pradesh. It also has one manufacturing unit located at Karawang in Indonesia.