TVS Motor surges 7% on heavy volumes on positive outlook

Shares of TVS Motor Company moved higher by 7.3 per cent to Rs 708.50 on the BSE in Wednesday's intra-day trade on the back of heavy volumes in an otherwise weak market on positive outlook.

The stock was the two-wheeler maker had hit a 52-week high of Rs 793.45 on November 9, 2021. Besides, it had touched a record high of Rs 795 on January 2, 2018. At 12:24 pm, TVS Motor was up 7 per cent at Rs 707.25 on the BSE, as compared to a 0.45-per cent decline in the S&P BSE Sensex.

Trading volumes on the counter jumped over five-fold today with a combined 5.56 million equity shares, representing 1.2 per cent of total equity of TVS Motor, having changed hands on the NSE and BSE till the time of writing of this report.

In the past three months, the stock has outperformed the market by surging nearly 30 per cent after the company reported highest-ever revenue, and earnings before interest, tax, depreciation and amortization (ebitda) for the quarter ended September 2021 (Q2FY22). In comparison, the S&P BSE Sensex was down 1.5 per cent during the same period.

Separately, TVS Motor, last week, announced the launch of its premium Apache RR 310 and 125 cc scooters TVS NTORQ in the Philippines market, boosting its product portfolio.

Further, the company had last month signed a Memorandum of Understanding (MOU) with the Government of Tamil Nadu for investment in Future Technologies and Electric Vehicle (EV). Under the MOU, TVS Motor Company will invest Rs 1,200 crore in Future Technologies and EV in the next four years. The investment will be mainly for the design, development and manufacturing of new products and capacity expansion in the EV space.

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

TVS iQube has a healthy order book. It is already available in 33 cities, and the management plans to expand pan-India by FY22-end. It plans to expand monthly capacity to 10k units by Jan’22. It is incorporating a wholly-owned subsidiary for the EV business to increase focus, flexibility, and freedom.

"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 Q2 results update. The brokerage firm retained 'buy' rating on the stock with a target price of Rs 800 per share.

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, analyst at Motilal Oswal Financial Services said.