TVS Motor shares dip despite strong Q2 results and raised price targets

TVS Motor Company Ltd. (NSE:TVSM) experienced a 3% decline in shares on Tuesday, October 31, 2023, closing the day at an intraday low of INR 1,585.45, despite posting higher than expected net profits for the September quarter. The company’s quarterly profit rose to INR 527 crore, slightly surpassing analysts’ average estimate of INR 525 crore. This came as scooter and motorcycle sales grew by 10% and 3%, respectively.

In the first half of FY2024, TVS Motor reported revenues of INR 15,362 crore and a record net profit of INR 1,004 crore. The company’s Q2 revenues stood at INR 8,145 crore with EBITDA growing by 22% to INR 900 crore and a net profit surge of 32% to INR 537 crore. The company’s iQube electric scooter sales saw a significant increase to around 58,000 units from last year’s 16,000.

Despite the dip on Tuesday, TVS Motor shares have seen a robust performance over the past year. The stock has surged by 50% year-to-date and risen by 38% over the past six months, outpacing the Nifty Auto index’s climb of 27%.

Analysts continue to show confidence in the company’s prospects. Jefferies raised its price target on the stock following the Q2 results announcement while Nuvama maintained its ‘Buy’ rating with a revised target price of INR 1,840. Analysts from Prabhudas Lilladher suggested that TVS is well positioned to outperform the industry, aided by Production-Linked Incentive (PLI) benefits.

TVS Motor’s market share gains are attributed to multiple new launches including Jupiter, Zest, Ntorq, iQube, Radeon and Raider, along with the premium electric scooter TVS X and the naked motorcycle Apache RTR 310. The company also inaugurated the TVS Racing Electric One Make Championship.

However, not all segments showed growth. H1 FY2024 two-wheeler sales rose to 19.5 lakh units from last year’s 18.38 lakh, but three-wheeler sales dropped to 78,000 units from 97,000.

InvestingPro Insights

According to real-time data from InvestingPro, TVS Motor Company Ltd. is a prominent player in the Automobiles industry, showing strong returns over the last three months, and even over the last decade. This aligns with the robust performance of TVS Motor shares mentioned in the article, which have surged by 50% year-to-date and risen by 38% over the past six months.

InvestingPro Tips suggest that despite the company’s strong performance, there are some areas of concern. The company’s earnings quality has been flagged as low, with free cash flow trailing net income. Additionally, the company’s valuation implies a poor free cash flow yield.

It’s important to note that InvestingPro offers a wealth of additional tips for investors, with a total of 20 tips available for TVS Motor Company Ltd alone. These tips provide valuable insights into the company’s performance, helping investors make informed decisions.

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