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Business News/ Markets / Mark To Market/  TVS rallies in electric 2W segment; improves on margin versus peers
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TVS rallies in electric 2W segment; improves on margin versus peers

TVS operated at significantly lower margins versus peers through most of the last decade, as it had a weak presence across most 2W sub-segments, point out analysts at Jefferies India

TVS’ iQube has clocked registrations of over 3,600 units in August so far.Premium
TVS’ iQube has clocked registrations of over 3,600 units in August so far.

TVS Motor Co. Ltd is growing rapidly in the electric vehicle (EV) segment, outperforming listed incumbents. According to Vahan registrations, the automaker’s electric two-wheeler (e-2W), iQube, has clocked registrations of over 3,600 units in August so far, which makes it the third top company in the e-2W segment with 14% market share.

Of course, the new entrants are leading the race but TVS is steadily bridging the gap. For perspective, TVS’ e-2W market share in June stood at 5%.

Moreover, its continuous efforts to improve the margin have paid off. TVS operated at significantly lower margins versus peers through most of the last decade, as it had a weak presence across most 2W sub-segments, point out analysts at Jefferies India.

“TVS’s Ebitda margin averaged just 6.4% in FY10-17 versus 15%/20% for Hero MotoCorp Ltd/Bajaj Auto Ltd; its average Ebitda/vehicle at Rs2,300 was 60%/77% below Hero/Bajaj," said analysts at Jefferies in a report on 18 August. Ebitda is short for earnings before interest, tax, depreciation and amortization.

“Its Ebitda margin has expanded to 10% in the last four quarters versus 12%/16% for Hero/Bajaj; its Ebitda/vehicle has also risen to Rs6,400 — just 10% below Hero and now 49% below Bajaj," added the report.

The company has also gained market share in various sub-segments over the years. According to Centre for Monitoring Indian Economy, in the scooters and 125cc+ bikes segment, TVS’ market share was 15% and 11% in FY17, respectively. This has increased to 21% and 18% in FY22, respectively.

To be sure, TVS’ domestic internal combustion engine (ICE) scooter portfolio is vulnerable to the increasing penetration of EVs as this segment constituted almost 37% of its total volumes in July. But rising EV volumes could help offset this. “We see a potential for stock valuations to expand if TVS is able to garner a similar market share in EVs as in ICEs," added the Jefferies report.

Shares of the company have rallied 56.5% in calendar year 2022 so far vis-a-vis 25% and 17% appreciation in Bajaj Auto and Hero MotoCorp’s shares, respectively.

 

 

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ABOUT THE AUTHOR
Vineetha Sampath
Vineetha is a part of the Mark to Market team, which specializes in offering cutting edge commentary on stocks and financial reports of companies. Vineetha looks at varied number of sectors, including automobile, aviation, FMCG, internet companies and metals. If you want to know -- why entry-level auto sales are not picking up; or which FMCG companies would be more adversely impacted due to weak rural demand; or why IndiGo’s landing is about to get tougher? You will find these answers and more in her stories. Vineetha is a chartered accountant.
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Published: 19 Aug 2022, 11:33 AM IST
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