TVS Motor: Performance Review Amid Export Recovery & Stock Decline

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TVS Motor Company, a leader in the Indian two-wheeler and three-wheeler market, has been a prominent name in the automotive industry. Recently, however, despite positive performance metrics and optimistic projections, its stock has faced a decline, leaving investors to ask what’s behind the downward trend. In this blog, we will explore the current performance of TVS Motor, the factors influencing its stock price, and why Macquarie analysts still maintain a positive outlook on the company despite recent market setbacks.

Overview of TVS Motor's Performance in Q3 FY25

TVS Motor has shown resilience in the third quarter of FY25, managing to increase its overall sales, including both domestic and export volumes. In Q3, the company reported an impressive 10% growth in total sales, which reached 12.12 lakh units, up from 11.01 lakh units in the same quarter of the previous year. The breakdown of these numbers reveals an encouraging pattern in TVS's diverse portfolio of products.

• Scooter Sales Surge: The company reported a robust 22% year-on-year increase in scooter sales, reaching 4.93 lakh units. This surge highlights the growing popularity of TVS's scooter range, which continues to capture the attention of a wide customer base, particularly in urban and semi-urban areas.

• Motorcycle Sales Growth: TVS's motorcycle segment also saw growth, albeit at a more moderate 6% increase, with 5.56 lakh units sold. This increase signifies the brand's strong position in the commuter motorcycle segment, despite the challenges faced in other areas.

• Three-Wheeler Decline: However, the three-wheeler segment experienced a decline, with sales dropping from 0.38 lakh units in Q3 FY24 to 0.29 lakh units. The decline in three-wheeler sales could be attributed to various factors such as competition, market saturation, or potential issues within the segment.

TVS Motor’s ability to maintain growth in both the scooter and motorcycle segments, despite challenges in three-wheelers, suggests strong brand positioning and operational efficiency in the face of diverse market demands.

Financial Performance of TVS Motor in Q3 FY25

In addition to the increase in sales volumes, TVS Motor reported a steady financial performance for the third quarter. The company’s net profit rose by 4.2% year-on-year, amounting to ₹618 crore. This profit increase was driven by the sustained demand across various product categories and operational improvements.

Moreover, TVS Motor's revenue from operations grew by 10% year-on-year, reaching ₹9,097 crore, compared to ₹8,245 crore in the same quarter of the previous year. This consistent revenue growth is a strong indicator of TVS’s effective strategies in capturing market share and maintaining strong sales performance across multiple segments.

Challenges Facing TVS Motor Stock Despite Solid Performance

Despite these positive financial results, TVS Motor’s stock has been on a downward trajectory, extending its losses for six consecutive sessions. On February 19, the stock price dipped more than 1%, continuing a recent trend of declines. Even though the company's performance indicators are favourable, the stock has witnessed nearly a 6% dip in the past week alone, sparking concerns among investors.

Several factors may be contributing to this decline, despite the positive results:

1. Overall Market Sentiment: The broader stock market has been volatile in recent weeks, with numerous factors affecting investor sentiment. The decline in TVS Motor’s stock could be linked to macroeconomic uncertainties, such as concerns about inflation, interest rates, and geopolitical tensions, which could create a more cautious outlook among investors.
2. Profit Booking: TVS Motor's stock had surged by around 120% in the past year, making it vulnerable to profit-booking by investors. As the stock reached new highs, some investors may have chosen to take profits, leading to the observed pullback.
3. Sector-Specific Concerns: The automotive sector, in general, has been facing some challenges. Rising input costs, supply chain issues, and fluctuating demand can impact the performance of individual companies, including TVS Motor. In particular, the slowdown in the three-wheeler segment, which has historically been a key area for the company, may have raised concerns.
4. Short-Term Market Reaction: Despite the company’s long-term growth prospects, stock prices in the short term often react to external factors. These could include global market trends, investor sentiment, and temporary setbacks that do not necessarily reflect the underlying financial health of the company.

Macquarie’s Positive Outlook Amidst Stock Decline

Despite the recent stock decline, TVS Motor has attracted favorable attention from analysts at Macquarie. The global brokerage firm recently upgraded its rating for TVS Motor, maintaining an 'outperform' stance and setting a target price of ₹2,904. This target implies a significant upside potential of 24% from the stock's current price.

Macquarie analysts have pointed out several reasons for their positive outlook:

• Export Market Recovery: Macquarie sees TVS Motor as one of the best-positioned companies in the two-wheeler segment to benefit from the ongoing recovery in the export market. TVS has a well-diversified presence across various international markets, including Latin America, Africa, and Southeast Asia. This geographical diversification helps the company offset fluctuations in domestic demand and tap into high-growth regions.

• Strong Market Share in Export Markets: TVS has consistently captured a significant share of the export market, with Latin America and Africa accounting for 70% of its total export volumes in FY24. This large share is expected to drive future growth, especially as demand for two-wheelers continues to rise in these regions.

• Electric Two-Wheelers (EVs): TVS Motor’s entry into the electric two-wheeler market, along with its growing focus on electric mobility, is expected to contribute significantly to its growth in the medium term. As EV adoption accelerates worldwide, TVS’s well-positioned portfolio of electric vehicles could attract a large customer base, particularly in emerging markets.

• Operational Efficiency: TVS Motor has demonstrated strong operational efficiency, which allows it to keep costs under control while expanding its product offerings. This operational excellence has played a role in driving the company’s profitability even amid market fluctuations.

• Market Share Gains: TVS Motor’s ability to gain market share in key export markets, along with its focus on product innovation, gives it a competitive edge in the two-wheeler industry. The company is expected to continue its market share expansion in the coming years.

What’s Next for TVS Motor?

While Macquarie has a positive outlook for TVS Motor, it is important to note that the short-term trend for the stock remains sideways. According to Ruchit Jain, Vice President of Equity Technical Research at Motilal Oswal Financial Services, the stock is likely to face resistance at ₹992–₹1,000 levels in the short term, with support at ₹925.

Jain suggests that TVS Motor’s stock could see a positive momentum if it breaks through the ₹1,000 mark. Until then, investors should expect sideways movement, with price fluctuations within a defined range.

The company's focus on export markets, EVs, and operational efficiency positions it well for the future. However, short-term volatility, sector-specific challenges, and external market factors may continue to impact its stock price.

Conclusion: A Long-Term Play Amidst Short-Term Volatility

TVS Motor is undoubtedly one of the strongest players in the two-wheeler market, with a diversified portfolio, strong export presence, and a promising future in the electric vehicle sector. While the short-term market conditions may cause fluctuations in its stock price, the company’s long-term growth prospects remain intact.

For investors, this presents an opportunity to consider TVS Motor as a long-term play, especially as the company capitalizes on recovery in export markets and the ongoing shift toward electric mobility. As always, investors should remain cautious of short-term volatility but should keep an eye on the long-term value that TVS Motor offers in the ever-evolving automotive industry.

With the backing of positive analysts' ratings and a growing presence in key international markets, TVS Motor is likely to continue on its growth path, despite the recent stock market fluctuations. As global markets recover and demand for two-wheelers, particularly electric vehicles, grows, TVS Motor is well-positioned to capitalize on these opportunities and emerge as a leader in the industry.