On Thursday, Ambit Capital started protection on TVS Motor Co Ltd (TVSL:IN), issuing a promote score with a value goal of INR 2,072.00. The agency’s evaluation means that the corporate’s spectacular efficiency over the previous 5 years could not maintain because of challenges within the home two-wheeler (2W) market and the potential impression of electrical automobile (EV) disruption.
TVS Motor has seen market share and margin growth, attributed to filling gaps in its product providing and fewer aggressive competitors. Nonetheless, Ambit Capital forecasts that the corporate’s outperformance within the home 2W market could diminish. That is partly due to the restricted areas the place TVS Motor can increase its portfolio and the truth that opponents are beginning to strengthen their market methods.
The corporate’s export enterprise is anticipated to proceed rising above the trade common because it enters new markets. Regardless of this, the rise of electrical automobiles poses a menace, significantly because of TVS Motor’s deal with scooters and bikes above 125cc, which can be extra vulnerable to shifts in client choice in direction of EVs.
Ambit Capital additionally notes that additional growth of TVS Motor’s EBITDA margin past 12.0-12.5% may very well be difficult. The corporate’s various however fragmented portfolio could restrict economies of scale, and the absence of section management may scale back its pricing energy.
The promote score comes with a good worth estimate primarily based on a reduced money stream evaluation and the worth of investments. The worth goal displays a 27.5 instances a number of of the corporate’s projected core earnings for the fiscal yr 2026, indicating that the present valuation could also be overly optimistic given the anticipated dangers.
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