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Informist, Wednesday, Oct. 16, 2024

 

By Darshan Nakhwa 

 

MUMBAI – TVS Motor Co Ltd. is expected to report strong growth in key earnings metrics for the September quarter, supported by healthy volume growth and higher average selling price due to a richer product mix, according to analysts. The two- and three-wheeler manufacturer's bottom line is expected to surge 31% on year to INR 7 billion. Its top line is seen up by 17% on year at INR 95.14 billion, according to an average of estimates from 11 brokerage firms. Sequentially, the net profit and net sales are seen growing 21% and 14%, respectively. 

 

The estimates for net profit during the quarter range from INR 6.47 billion by Motilal Oswal Financial Services to INR 7.67 billion by Nomura Equity Research. The highest and the lowest estimates for the top line are INR 96.25 billion by Nomura Equity Research and INR 93.20 billion by Elara Securities (India), respectively.   

 

The Chennai-based company'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 analysts. For the September quarter, Motilal Oswal Financial Services and YES Securities have pegged the company's realisation per unit at INR 77,800. In Jul-Sept 2023, TVS Motor's realisation per unit was INR 75,800 and in Apr-Jun this year, it was INR 77,000, as per a pre-earnings note from Motilal Oswal Financial Services.  

 

The company's earnings before interest, tax, depreciation, and amortisation is estimated at INR 11.24 billion for the September quarter, as per the average of nine estimates. The estimates for EBITDA ranged from INR 10.61 billion to INR 11.97 billion. In Jul-Sept 2023, the company's EBITDA was INR 9 billion, and in Apr-Jun this year, it was INR 9.60 billion.
 

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, better operating leverage, and healthy growth in export volume, according to analysts. The average of estimates from nine brokerages for EBITDA margin is seen at 11.7% for Jul-Sept. In Jul-Sept 2023, TVS Motor's EBITDA margin was 11%, and it was 11.5% in Apr-Jun this year.

 

According to Kotak Institutional Equities, the company's EBITDA margin is expected to increase by 30 basis points on quarter due to operating leverage benefits, higher mix of three-wheeler volumes, and commodity tailwinds partly offset by a higher mix of a margin dilutive electric vehicle volumes. However, Motilal Oswal Financial Services expects the company's margin to contract sequentially due to weak product mix on account of rising electric vehicle sales.

 

During the September quarter, TVS Motor's cost of raw materials consumed as a percentage of revenue is expected to decline to 72.2% from 74% in Jul-Sept 2023. However, this metric is seen growing from 71.4% in the June quarter.

 

In Jul-Sept, prices of aluminium, copper, and natural rubber rose 9-52% on year. However, prices of domestic and Chinese cold rolled coil steel were down 5% and 20%, respectively. Meanwhile, on a sequential basis, prices of domestic and Chinese cold rolled coil steel, aluminium, lead and copper, declined 5.5-18.2%. However, the price of natural rubber jumped 20%, according to data from Kotak Institutional Equities. The impact of change in prices of raw materials is usually reflected in the earnings of automakers, with a lag of a quarter.

 

WHOLESALE VOLUMES

In Jul-Sept, the two- and three-wheeler manufacturer sold a total of 1.23 million units, marking a growth of 14% on year and 13% sequentially. The sales growth was powered by an improvement in rural demand due to the above-normal monsoon, and expectation of strong demand during Ganesh Chaturthi and Onam.

 

TVS Motor sold a total of 1.19 million two-wheelers in the September quarter, representing a growth of 15% on year and 13% sequentially. Its domestic sales were up by 15% on year and 10% on quarter at 912,461 units. The company's two-wheeler exports grew by 16% on year, and 22% sequentially to 277,848 units. 

 

In the two-wheeler category, the company reported healthy growth in despatches of both motorcycles and scooters in Jul-Sept. While motorcycle sales rose 14% on year and 9% sequentially to 560,828 units, scooter sales grew around 17% on year and on quarter to 490,375 units.

 

In the September quarter, the company's electric scooter sales surged by 31% on year and 45% sequentially to 75,122 units. During the quarter, legacy two-wheeler manufacturers gained market share in India's electric two-wheeler space, with introduction of affordable variants, as well as expansion in the distribution network, while maintaining a core focus on quality. Meanwhile, market leader Ola and other startups continued to lose market share due to product quality issues or lack of affordable product options. In Jul-Sept, the company's three-wheeler sales were down by 12% on year but were up 19% on quarter at 37,914 units. 

 

TVS Motor is scheduled to detail its earnings for the September quarter on Oct. 23. 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. 

 

At 1454 IST, shares of TVS Motor were at 2,771.90 rupees on the National Stock Exchange, down 2.2%. The company's stock has gained nearly 19.3% since its June quarter earnings announcement on Aug. 6.
 

Following are the Jul-Sept earnings estimates for the company based on reports compiled by Informist from 11 brokerages:

 

Brokerage firm	Net sales (in mln rupees)	Net profit (in mln rupees)	EBITDA (in mln rupees)
Anand Rathi Share and Stock Brokers Ltd	94,641	7,114	----
Axis Securities Ltd	95,440	7,060	11,430
Elara Securities (India) Pvt Ltd	93,203	6,866	10,905
Kotak Institutional Equities	95,095	6,930	11,190
Motilal Oswal Financial Services Ltd	95,568	6,471	10,608
Nirmal Bang Equities Pvt Ltd	95,292	7,077	11,244
Nomura Equity Research	96,248	7,672	11,971
Nuvama Wealth Management Ltd	94,162	6,902	10,975
Prabhudas Lilladher Pvt Ltd	95,910	7,165	11,413
Sharekhan Ltd	95,380	6,550	----
YES Securities (India) Ltd	95,568	7,214	11,426
Average	95,137	7,002	11,240

End

 

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

 

Edited by Vidhi Verma

 

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