TVS Motor Company (TVS) reported mixed quarterly performance, while the continuation of demand recovery appears to be cloudy. As pent-up demand is slowly declining and consumer preference is leaning towards cheaper 2Ws, the near-term outlook is uncertain, where TVS presence is low. Sales projections from its most profitable segments (3W & exports) are also vague. This is often creating supply-side problems along with local level lockdowns. In FY21, we believe that TVS will grow less than the industry and that competitive prices in the entry segment will hurt its mopeds’ sales. In our view, current values are increased and therefore we recommend ‘decrease’.
We caused all the visible uncertainties related to Covid-19. Built a sharp recovery in FY22e volumes (after two years of high-digit de-growth). However, considering Elevated Valuations. We recommend a ‘Reduce’ rating with a target price of Rs.357 (20x FYY22E EPS and TVS Credit Value Rs.37 / share).