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Informist, Monday, Jul 15, 2024

 

By Darshan Nakhwa 

 

MUMBAI – Two- and three-wheeler manufacturer TVS Motor Co Ltd is expected to report strong growth in key earnings metrics for the June quarter, supported by robust volume growth, price hikes, and moderation in raw material costs, according to brokerage reports. The company's bottomline is expected to grow by 23% on year, and by 19% sequentially to 5.77 bln rupees. Its topline is seen up by 17% on year, and by 3% on quarter to 84.18 bln rupees, according to an average of estimates from 10 brokerage firms. 

 

Among the estimates, the highest projection for net profit for Apr-Jun is 5.99 bln rupees, and the lowest is 5.56 bln rupees. The highest and the lowest estimates for the topline are 85.34 bln rupees and 82.52 bln rupees, respectively. 

 

TVS Motor's year-on-year revenue growth will be driven by around 14% increase in wholesale volume and nearly 3% growth in average selling price due to a higher mix of premium products in total sales, according to brokerages. However, the company's performance against Jan-Mar is likely to be subdued due to modest growth in overall sales, flat average selling price and an uptick in prices of some commodities. 

 

The company's average selling price per unit is expected to be flat sequentially, as the benefit of a richer product mix in domestic sales is likely to be offset by an adverse export model mix, according to Emkay Global Financial Services. In Apr-Jun, TVS Motor's realisation per unit is seen at 77,600 rupees compared to 75,700 rupees in the year-ago period, and 76,900 rupees in Jan-Mar, as per a pre-earnings note from Motilal Oswal Financial Services.  

 

The company's earnings before interest, taxes, depreciation, and amortisation is estimated at 9.59 bln rupees for the June quarter, representing a growth of nearly 26% on year and 4% on quarter, as per the average of eight estimates. The highest and lowest estimates for EBITDA are 9.92 bln rupees and 9.08 bln rupees, respectively.

 

On the EBITDA margin front, the company is expected to report an expansion on a year-on-year basis, on account of richer product mix, higher average selling price, lower input cost, and operating leverage benefits. The average of estimates from eight brokerages for EBITDA margin is seen at 11.36% for Apr-Jun. In the same quarter in 2023-24 (Apr-Mar), TVS Motor's EBITDA margin was 10.6%, and in Jan-Mar it was 11.3%.

 

In Apr-Jun, prices of aluminium, copper, lead, and rubber rose from 6-16% on quarter. However, prices of domestic and Chinese cold rolled coil steel were down 1.2% and 8.1%, respectively. Meanwhile, on a year-on-year basis, prices of domestic cold rolled coil steel, aluminium, lead, copper, and rubber declined 2-31%, according to data from Kotak Institutional Equities. 

 

During the quarter, TVS Motor's cost of raw materials consumed as a percentage of revenue is expected to decline to 72.8% from 74.6% in Apr-Jun 2023. However, this metric is seen flat against the March quarter.

 

WHOLESALE VOLUMES

In Apr-Jun, the two- and three-wheeler manufacturer sold a total of 1.09 mln units, marking a growth of 14% on year and 2.3% sequentially. The sales growth was powered by higher despatches of two-wheelers on account of better rural demand--on expectation of an above-normal monsoon--as well as healthy growth in exports.

 

TVS Motor sold a total of 1.06 mln two-wheelers in the June quarter, representing a growth of 15% on year and 2.3% sequentially. Its domestic sales were up by nearly 15% on year and 4% on quarter to 828,323 units. The company's two-wheeler exports grew by 16% on year, but were down 3.3% sequentially to 228,027 units. In Apr-Jun 2023, the company's exports were impacted due to macroeconomic uncertainty and currency depreciation in key international markets. 

 

In the two-wheeler category, the company reported healthy growth in despatches of both motorcycles and scooters in Apr-Jun. While motorcycle sales rose 11.2% on year and were flat sequentially at 514,438 units, scooter sales grew nearly 20% on year and by 6% on quarter to 418,417 units. The company's electric scooter sales were up 34% on year and 5% sequentially at 51,936 units.   

 

In Apr-Jun, the company's three-wheeler sales were down by 5% on year but were up 16% on quarter to 35,206 units. TVS Motor is scheduled to detail its earnings for the June quarter on Aug 6. According to brokerages, the company's outlook on demand and any commentary on electric-mobility initiatives will be some of the key things to watch out for.

 

TVS Motor's stock has gained nearly 23% since its March quarter earnings. Today, the company's stock ended 0.5% higher at 2,450.85 rupees on the National Stock Exchange.

 

Following are the Apr-Jun earnings estimates for the company based on reports compiled by Informist from 10 brokerages:

 

Brokerage firm	Net sales (in mln rupees)	Net profit (in mln rupees)	EBITDA (in mln rupees)
Anand Rathi Share and Stock Brokers Ltd	84,153	5,626	----
Elara Securities (India) Pvt Ltd	84,030	5,811	9,748
Emkay Global Financial Services Ltd	84,001	5,850	9,492
ICICI Securities Ltd	85,338	5,868	9,868
Kotak Institutional Equities	82,516	5,563	9,379
Motilal Oswal Financial Services Ltd	84,419	5,848	9,917
Nuvama Wealth Management Ltd	83,759	5,608	9,087
Prabhudas Lilladher Pvt Ltd	84,949	5,991	9,717
Sharekhan Ltd	83,750	5,760	----
YES Securities (India) Ltd	84,837	5,746	9,502
Average	84,175	5,767	9,589

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Vidhi Verma

 

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