TVS Motor Stock Jumps To The Highest In Two Years On Record Revenue, Profit
Still, 50% of the analysts tracking TVS Motor recommend a ‘sell’.
Shares of TVS Motor Co. jumped to the highest in two years after the two-wheeler maker reported record revenue and profit during the quarter ended December.
The company’s revenue rose 31% over the year earlier to Rs 5,391 crore, according to an exchange filing. That compares with the Rs 5,280-crore consensus estimate of analysts tracked by Bloomberg.
Its net profit increased 35% to Rs 265 crore, against the projected Rs 237 crore.
Other highlights (year-on-year)
- Operating profit, or earnings before interest, tax, depreciation and amortization, rose 41% to Rs 511 crore, against the estimated Rs 418 crore
- Margin expanded 70 basis points to Rs 9.5%.
“The third quarter of last year had a one-time reversal of an exceptional item of Rs 76 crore,” the company said in the filing. “Focussed working capital management and improved operating performance helped the company generate free cash flow of Rs 1,616 crore,” it said, adding the free cash flow was utilised to pare debt.
Two-wheeler sales in the domestic market rose 21% year-on-year during the reported quarter, while exports were up 31%. “This was ahead of industry growth of 13% and 20%, respectively,” the company said.
According to Deep Shah of Prabhudas Lilladher, near-term tailwinds such as better export outlook and favourable mix are already reflected in the company’s expensive valuations. “Further, a sharp increase in raw material cost, too, will act as a headwind since series of price hikes over past 18 months have already impacted buying sentiments significantly,” Shah said in a post-earnings note.
CLSA, in a separate post-earnings note, said while the stock continues to trade at a premium to its mass-market two-wheeler peers Hero MotoCorp Ltd. and Bajaj Auto Ltd., this can continue due to its higher EPS growth and improving free cash flow conversion.
CLSA has also raised its FY21-23 EPS estimates for the company by 15-19%, and hiked price target to Rs 600 apiece from Rs 525. It has maintained an ‘outperform’ rating on the stock.
Shares of TVS Motor gained as much as 10%—the biggest single-day gain since April last year—to Rs 583.85 apiece. That’s also the highest since December 2018. Of the 42 analysts tracking the company, 13 have a ‘buy’ rating, eight suggest a ‘hold’ and 21 recommend a ‘sell’. The stock is trading 13.5% higher than its Bloomberg consensus 12-month price target of Rs 496.8 apiece.