TVS Motor shares fall 3% as analysts remain mixed on outlook. Should you buy, sell or hold?

TVS Motor’s scooter and motorcycle sales rose 10% and 3%, respectively, during the quarter.

Domestic brokerage firm Nuvama maintained its 'Buy' rating on TVS Motor with a revised target price of ₹1,840 from ₹1,510 earlier. Nuvama said that TVS has been gaining domestic share. Market share has grown from 14% in FY18 to 16% in FY23.

The brokerage expects a further increase from 16% in FY23 to 18% in FY26, led by increased share in executive or premium bikes and electric vehicles.

"Multiple launches (Jupiter, Zest, Ntorq, iQube, Radeon and Raider) over the years have enabled volumes, market share gains. We estimate outperformance in overseas markets with new products, better penetration, and FY23-26E domestic/export 2W volume CAGR at 11%/8%," it said.

Himanshu Singh - Research Analyst at Prabhudas Lilladher believes TVS is well placed to outperform the industry given good tractions for new product launches in ICE and EV segments; higher focus on exports and premiumisation and margin improvement helped by cost control; operating leverage; benign input prices and PLI benefits to likely offset impact from higher EV mix.

The brokerage has retained ‘Accumulate’ with a revised stock target of ₹1,650 from earlier ₹1,560.

The domestic two-wheeler demand is led by improving consumer sentiments, as indicated by festive demand, and expected rural recovery, the brokerage said. Affordability and currency related challenges in the international markets have largely bottomed out, it said.

Overall, the brokerage expect TVSL's outperformance to continue on the volume front, while steady or softening RM prices, operating leverage and astute cost management would help on the margin front. "We estimate revenue/ EPS CAGR of 15%/28% over FY23-26E."

However, JM Financial noted that a prolonged slowdown in the international market remains a key risk.

Analysts at global brokerage house Citi have a 'Sell' rating on the counter but raised its target price to ₹1,050 on positive outlook. "The management continues to increase its investment in subsidiaries despite mounting losses," the broking firm said in a report, citing the reason behind drain in cash flow. It also added that the electric vehicle plans seem ambitious and the pace of exports demand is expected to improve very gradually.

The global brokerage too voiced concern over draining cash flow for the company because of the investment in subsidiaries. CLSA has retained its 'Sell' rating with a target of ₹1,206.

Jefferies, meanwhile, has raised its target price on the counter to ₹2,000. This suggests an upside potential of 24% from the current market price of TVS Motor. The brokerage said that TVS will be a key beneficiary of the two-wheeler demand revival. "Its improving franchise also provides headroom for further margin expansion.

Jefferies sees a 35% earnings per share (EPS) CAGR over FY23-26.