TVS Motor shares hit fresh record high, jump 5.6% on stellar Q1 results. Should you buy?

TVS Motor, one of the country's leading two-wheeler and three-wheeler manufacturers, saw its shares spike by 5.6% in early morning trade, reaching an all-time high of ₹2,618 apiece after reporting a healthy set of numbers for the quarter ending in June.

The company, post-market hours on Tuesday, reported a 16% increase in revenue from operations, totaling ₹8,376 crore compared to ₹7,218 crore in the quarter ended June 2023.

TVS Motor posted its highest ever operating EBITDA of ₹960 crore, a growth of 26% for the first quarter of 2024–25, compared to ₹764 crore in the first quarter of 2023–24. Its operating EBITDA margin improved significantly by 90 basis points to 11.5%, up from 10.6% in the quarter ended June 2023.

During the June quarter, the company's profit after tax (PAT) grew by 23% to ₹577 crore, compared to ₹468 crore in the first quarter of 2023–24.

Looking at the sale, the company's two-wheeler and three-wheeler sales, including exports, grew by 14%, with 10.87 lakh units sold in the quarter ended June 2024, compared to 9.53 lakh units in the same quarter of the previous year. Motorcycle sales grew by 11%, registering 5.14 lakh units compared to 4.63 lakh units in the previous year's quarter.

Scooter sales, on the other hand, for the reporting quarter grew by 19% to 4.18 lakh units, up from 3.50 lakh units. Three-wheeler sales for the quarter stood at 0.31 lakh units, compared to 0.35 lakh units in the first quarter of 2023–24.

Meanwhile, electric scooter sales for the quarter reached 0.52 lakh units, up from 0.39 lakh units in the same period last year, according to the company's earnings report. 

During the quarter, TVS Motor introduced new variants to its TVS iQube portfolio, making electric mobility more accessible. The TVS iQube is now available in three battery options: 2.2 kWh, 3.4 kWh, and 5.1 kWh.

Looking at other key highlights: During the June quarter, the company invested ₹1.64 billion in TVS Motor (Singapore) Pte Ltd., compared to an investment of Rs. 12.3 billion in FY24. In TVS Credit, the company’s investment for Q1 stood at Rs. 2.83 billion. The company mentioned that it may not need to further invest in TVS Credit in FY25 as the capital adequacy ratio is comfortably at 18.9%.

Should you buy the stock post-Q1?

Global brokerage firm Phillip Capital noted that the company’s margins continue to impress due to a better mix and sustained cost reduction. While the export market remains a concern, particularly in certain African markets, TVS’s geographic expansion plans and investments are expected to partially mitigate these challenges.

"We finally get clarity on the Norton launch plans, which seems impressive considering a new affordable product portfolio, which would also target the growing domestic premium 2W segment. However, the valuation is rich and is factoring in the positives, as we value it at 27x FY26e EPS + the value of subs at ₹2,261. Maintain 'Neutral'," the brokerage added.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.