In the past three months, stock of the two-wheeler company outperformed the market by surging 28 per cent, after it reported healthy operational performance in the July-September quarter of FY21 (Q2FY21). In Q2FY21, Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin improved by 50 basis points to 9.3 per cent from 8.8 per cent in Q2FY20 due to strong focus on cost reduction initiatives taken by the company.
For Q3FY21, TVS Motor
had posted 23 per cent year on year (YoY) growth in two-wheelers (2Ws) sales at 9.52 lakh units as against sales of 7.73 lakh units in the third quarter FY19-20. Three-wheelers sales, however, declined 21 per cent YoY at 38,000 units as against 48,000 units in the corresponding quarter of previous fiscal.
"For Q3FY21, TVS Motor's revenues should rise YoY driven by a 20 per cent rise in volumes and 6 per cent increase in realizations. Volume growth has been supported by 2Ws in domestic and export segments. Despite better scale, benign currency and cost reduction efforts, EBITDA margin is likely to contract on adverse mix, higher input costs and loss of MEIS scheme export incentives," analysts at Emkay Global Financial Services said in result preview.
However, in FY22, analysts expects overall 2Ws volumes are expected to recover to FY20 levels of around 17.4 million units, implying 15 per cent growth over FY21. Student demand, which has been weak in FY21 YTD, is expected to pick up in FY22E. After a decline in Scooters' share in FY21 YTD to 29 per cent, it is expected to recover to 31 per cent in FY22E, driven by the recovery in urban demand.
For 3Ws, volume growth is expected to be strong at 70-90 per cent in FY22E. Strong recovery is expected in both Cargo and Passenger segments. Electric vehicles (EV) penetration is likely to gradually increase due to cost economics and subsidies, it said in sector update.
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