TVS Motor Company Ltd has outperformed Bajaj Auto Ltd and Hero MotoCorp Ltd on revenue growth and Ebitda margin in March quarter (Q4FY22). Ebitda is earnings before interest, taxes, depreciation and amortization.
TVS saw a 4% year-on-year (YoY) growth in standalone revenue to Rs 5,530 crore. Net realization improved 12.5% annually due to price increases and favorable mix, although this was partially offset by an 8% decline in volumes. This is in contrast to Bajaj Auto and Hero MotoCorp’s Q4 revenue decline of 8% and 14.6%, respectively. While the former’s volumes were heavily impacted by the semiconductor shortage, the latter were hit by a slowdown in the entry segment.
In addition, TVS’s Ebitda rose 4% year-on-year to Rs 557 crore. Ebitda margins remained stable year-over-year and stood at 10.1% sequentially, as an 81 basis points (bps) year-on-year decline in gross margin was offset by a decline in other expenses. One basis point is 0.01%. Note that Bajaj Auto (adjusted) and Hero reported a decline of 84 bps and 279 bps in Q4 EBITDA margins, respectively.
“Diversified domestic portfolio, growing export mix and success in the premium two-wheeler (2W) segment are making TVS’s Ebitda growth better than its peers,” analysts at ICICI Securities said in a report on May 6. The share of exports increased from 37% in Q4FY22 to 35% in Q4FY21.
Automakers are facing the heat from rising commodity prices and have resorted to hike in prices. In a post-earnings call, TVS said it increased prices by 1.5 per cent in the fourth quarter. Going forward, the company expects the input cost to rise further and in response to further hike in prices.
While this will impact demand, expectations of a normal monsoon and waning Covid cases mean that the outlook for FY13 is positive. Chip shortages, which impacted production across its premium portfolio in Q4, are also expected to ease gradually.
On the electric vehicle (EV) front, as per the management, there are over 12,000 bookings pending for its product, TVS iQube. It plans to expand the production capacity to 10,000 units per month by the end of Q1FY23. Apart from this, it also aims to launch electric 2W and three-wheelers in the coming quarters.
While this is encouraging, the company will have to increase its EV portfolio amid increasing competition. It should be noted that TVS derives a significant portion of its revenue from the ICE (internal combustion engine) scooter business which makes it vulnerable to increasing EV adoption.
“We raise our FY23 earnings per share estimate by 13% to reflect a rise in prices and some recovery in domestic demand. We maintain our FY24 estimate. “We maintain our neutral rating with a target price of Rs 650 per share, as valuations largely offset the expected strength in earnings growth and the risk of EV disruption in the scooter business,” analysts at Motilal Oswal Financial Services said in a report. takes hold. May.
Shares of TVS were trading flat on Friday, a day when the benchmark Nifty 50 index was down 1.6%. Shares of TVS have remained flat in the past one year, while those of Bajaj Auto and Hero have fallen 11 per cent and 13.4 per cent, respectively.