TVS Motors sees investor confidence improve with good second quarter show and better outlook

Investor confidence has remained low in recent years due to low demand for two-wheelers in the country.

However, TVS benefited from strong exports and recorded total sales of two-wheelers of 870,000 units in the quarter compared to 834,000 units in the second quarter of 2020-2021. Export sales of two-wheelers increased 46% from the second quarter of last year. Motorcycles recorded sales of 439,000 units in the quarter ended September 2021 compared to sales of 366,000 units recorded in the quarter ended September 2020.

Another concern for investors was rising commodity costs. Some increase in achievements and careful cost management enabled the company to post decent operational performance. Average realizations per share at ??61,000 units were 15% higher year over year. The company also posted the highest ever EBITDA of ??562 crores against ??430 crore in the quarter ended September 2020.

Analysts at Motilal Oswal Financial Services Ltd said the contraction in gross margin was limited to 50bp sequentially (up 30bp year-on-year) to 23.8% as commodity cost inflation was lower. diluted by price increases and a better mix.

As the company’s second quarter performance is impressive, the prospects for two-wheeler sales in the country have also improved. The current holiday season is expected to help boost sales of two-wheelers.

The domestic two-wheeler volume outlook is positive and premium motorcycles / scooters could outperform, analysts at Emkay Global Financial Services Ltd. said. % CAGR in volume for fiscal year 22-24.

Confidence on profitability also improved with the performance of Q2. Rising sales can help businesses pass on costs.

“We expect the company’s profitability to improve due to strong demand dynamics in export markets and a gradual recovery in the domestic market,” analysts from Kotak Institutional Equities Ltd. said.