After PAT increased by 506% in Q1, TVS shares reached an all-time high. Should you invest?

After the motorbike manufacturer released higher-than-expected financial results for the three months ending in June, TVS Motor Company shares soared up to 10%, reaching an all-time high of Rs 947.8 on the BSE on Friday.

According to TVS Motor Company, its consolidated net profit for the first quarter ended June 30 was Rs 297 crore. In the COVID-19 struck April–June quarter of the previous fiscal year, it had posted a net loss of Rs 15 crore.

Due to lockdowns, the company said the first quarter's figures were not exactly comparable to the first quarter of the previous year. In comparison to the 6.58 lakh units sold in the quarter ending June 2021, the entire sales of two and three-wheelers, including exports, increased to 9.07 lakh units in the quarter ending June 2022.

In the June quarter, motorcycle sales increased to 4.34 lakh units from 4.05 lakh units in the corresponding quarter last year. Similar to this, scooter sales increased to 3.06 lakh units for the June 2022 quarter from 1.38 lakh units the year prior. According to the PTI article, TVS claimed to have exported the most two-wheelers ever, 2.96 lakh units in the first quarter compared to 2.9 lakh units the previous year.

The board of the firm also authorized the issuance of non-convertible debentures (NCDs) of Rs 125 crore through a private placement. On the BSE, firm shares ended the day 2.35 percent higher at Rs 869.20 per share.

Should You Invest?

The company's strong set of quarterly figures was recognized by UBS Securities, who also underlined that the best was yet to come. It has increased its expected earnings per share for FY23 and FY24 by 14% and 5%, respectively. According to the brokerage firm, TVS Motor is comparably less expensive than Bajaj Auto and Eicher Motors from a valuation perspective.

Citi advises investors to "sell" TVS Motor shares because of the intense competition and the company's declining market share in the domestic motorcycle industry, despite the favorable views of UBS Securities and Reliance Securities.

Citi said that the results for April through June were somewhat higher than anticipated. Additionally, it stated that the company anticipates volume to remain stable and that management has a favorable outlook.

Prabhudas Lilladher analysts stated: "With the help of (1) new product launches in the ICE and EV segments and its revamped product portfolio, (2) strong exports and premiumization, and (3) margin protection through cost-cutting measures and price increases, we think TVs will be able to sustain growth momentum and grow ahead of the industry. We slightly raise our EPS projections by 2% each for FY23 and FY24 to account for the solid 1Q results. With a revised target price of Rs 950 at 24x on FY24E EPS and Rs 34 for TVS Credit, the stock remains in the "BUY" range."

With sales of more than 18,217 crores (about US$2.9 billion), TVS Motor Company is the third-largest two-wheeler manufacturer in India. It can produce over 4.95 million automobiles annually and sells more than 3 million units annually. TVS Motor is also India's second-largest exporter, sending goods to more than 60 nations.

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