TVS Motor’s rising EV market share pushes Jefferies to up target price but Street is cautious

TVS Motor Company’s shares continued to gain for the second day on Friday as Dalal Street rewarded the two-wheeler maker’s expanding market share. However, investors turned cautious on the stock around noon as the market edged lower.

TVS Motor shares fell more than 2 percent from the day’s high in intraday trade. The stock was trading at Rs 969.85, down 0.42 percent from the previous close, despite global brokerage Jefferies raising its target price on the stock from Rs 1,100 to Rs 1,200.

This means the brokerage, with a ‘buy’ rating, sees a more than 23 percent upside in the two-wheeler manufacturer’s stock from its last closing price of Rs 973.90 on Thursday.

“TVS's E2W registrations rose to 4.1K units in July, surpassing Ola Electric in the month and taking it to the 4th position in electric 2Ws. The first half of Aug has been even better for TVS with 3.2K registrations, making it the 3rd player in E2Ws with 14 percent market share,” Jefferies said.

According to the brokerage, after a long period of subdued margins, TVS is narrowing the gap with peers and increasing its earnings before interest, taxes, depreciation, and amortisation (EBITDA) share in the industry.

Its average EBITDA per vehicle at Rs 2,300 in FY10-17 was 71 percent below the average for Hero and Bajaj and this has risen to Rs 6,400 in the last four quarters, just 35 percent below peer average, it pointed out.

Jefferies noted TVS's EBITDA share in its peer group is up from 6 percent in FY17 to 13 percent in FY22.

It also highlighted that TVS, with its attractive product propositions, has gained market share across multiple segments over FY17-22 — from 15 percent to 21 percent in scooters; from 11 percent to 18 percent in 125cc+ motorcycles; from 16 percent to 25 percent in 2-wheeler exports and from 21 percent to 33 percent in 3-wheeler exports.

Improving franchise has boosted TVS' pricing power, it added.

Jefferies expects TVS's earnings to more than double over FY22-24, led by a revival in Indian two-wheelers’ demand from an abnormal trough and further margin expansion amid easing commodity prices

“Risk of lower share in EV vs ICE scooters has been a key concern, which should be mitigated with rising EV volumes; we see a potential for stock valuations to expand if TVS is able to garner a similar market share in EVs as in ICEs,” it asserted.