TVS rallies in electric 2W segment; Margins vs. Peers Improvement

Of course, new players are at the forefront of the race, but TVS continues to bridge the gap. For perspective, TVS’s e-2W market share was 5% in June.

In addition, its continued efforts to improve margins have paid off. Analysts at Jefferies India say TVS operated at a much lower margin than its competitors for most of the last decade, as it had a weak presence in most of the 2W sub-segment.

“TVS’s EBITDA margin averaged only 6.4% in FY 2010-17 as against 15%/20% for Hero MotoCorp Ltd./Bajaj Auto Ltd.; Its average EBITDA/Vehicle Rs 2,300 was 60%/77 per cent less than Hero/Bajaj.

“Its EBITDA margin has increased to 10% in the last four quarters, compared to 12%/16% for Hero/Bajaj; Its EBITDA/vehicle has also increased to Rs 6,400 which is just 10 per cent less than Hero and now 49 per cent less than Bajaj.

The company has also gained market share in various sub-segments over the years. In the scooter and 125cc+ bike segments, TVS had a market share of 15% and 11% respectively in FY17, according to the Center for Monitoring Indian Economy. It has gone up to 21% and 18% respectively in FY 2012.

To be sure, TVS’s domestic internal combustion engine (ICE) scooter portfolio is sensitive to the growing EV penetration as the segment accounted for around 37% of its total volumes in July. But increasing EV volumes could help offset that. “If TVS is able to capture the same market share as ICE in EVs, we see the potential for expansion of the stock valuation,” the Jefferies report said.

Shares of the company have risen 56.5% in the calendar year 2022 so far with Bajaj Auto and Hero MotoCorp rising 25% and 17% respectively.

first article