TVS Motor soars 10% on highest-ever revenue, EBITDA in Q2

Shares of TVS Motor Company soared 10 per cent to Rs 632.85 on the BSE in Friday’s intra-day trade on back of heavy volume after the company reported highest ever revenue, earnings before interest, tax, depreciation and amortization (ebitda) for the quarter ended September 2021 (Q2FY22).

The stock of two and three-wheeler manufacture had hit 52-week high of Rs 665.70 on May 27, 2021. At 10:35 am, it was trading at Rs 617.50, up 7 per cent on the BSE, as compared to 0.65 per cent rise in the S&P BSE Sensex. The trading volume at the counter more than doubled with a combined 11.2 million equity shares changing hands on the NSE and BSE.

In Q2, the company reported 22 per cent year on year (YoY) growth in revenue of Rs 5,619 crore, above analysts estimates of around Rs 5,400 crore, mainly due to a 39 per cent YoY jump in spare-part sales. Ebitda margin expanded by 70bps YoY to 10 per cent, aided by the restoration of export incentives, higher spare-part sales and a one-time benefit relating to export incentives of the last two quarters.

TVS Motor said despite various challenges in terms of increase in commodity costs, scarcity of containers for international business and shortage in semiconductors through significant cost reduction initiatives and growth in revenue. During the quarter, focused working capital management and improved operating performance helped the company to generate operating free cash flow of Rs 1,090 crore, it added.

The company's board approved the incorporation of a subsidiary to undertake the electric mobility business. It will invest Rs10bn on product development and capacity expansion. Electric Vehicle (EV) launches are targeted at segments such as premium scooters, high-performance sporty motorcycles, commuter space, delivery market and 3Ws.

“The domestic 2W volume outlook is positive, and premium motorcycles/scooters could outperform ahead. In addition, the export outlook is encouraging, owing to healthy demand in Africa and Latin America regions. We expect 11 per cent volume CAGR over FY22-24E,” analysts at Emkay Global Financial Services said in result update.

“Volume growth is expected to be driven by new product launches (Raider) in the domestic market as well as a ramp-up in exports. It is enjoying the benefits of economies of scale and operating leverage, resulting in Ebitda margin nearing the double-digit range. TVS earns 40 per cent of overall Ebitda from the domestic Scooter business, making it vulnerable to an EV disruption in the listed 2W space,” Motilal Oswal Securities said.