TVS Motor investors, miles ahead of others
TVS Motor Co. Ltd stock seems to be saying. The two-wheeler maker’s shares have risen close to 50% so far in 2023, after gaining 73% in 2022.
This means its market capitalization has risen to about ₹75,600 crore on 31 October from ₹29,788 crore on 31 December 2021. Investors have given a thumbs up to the steady margin performance and rising market share in the electric vehicle segment. The company has maintained double-digit Ebitda margin in the range of 10-10.6% since the December 2021 quarter till the June quarter (Q3FY22 to Q1FY24).
In the September quarter (Q2FY24), margin improved a notch to 11%, a record high, taking TVS’ shares to a new 52-week high of ₹1,634 on Tuesday. Ebitda is earnings before interest, tax, depreciation, and amortization. Factors such as cost control initiatives, favourable product mix and price hikes have helped the margin performance.
This is even after the share of margin dilutive electric vehicles is rising. TVS has so far remained unscathed. TVS’ electric vehicle iQube’s volume grew by nearly 49% sequentially in Q2.
Of course, the moot question now is if the upward trajectory of Ebitda margin would sustain. While there are factors to support TVS’ margin expansion, there are speed bumps on the road ahead. For one, a large part of the benefits of lower commodity prices seems to have already accrued.
In the Q2 earnings call, TVS said it believes costs will not rise in the next two quarters. Secondly, the upcoming launches means more spending on advertising thus weighing on the margin. The company is planning a series of electric vehicle launches.
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