During the quarter, TVS Motors reported in-line numbers on the revenue front, whereas below the expectation on the margin front. Top line came at ₹6,545 crore (-9.3 per cent q-o-q /+14.7 per cent y-o-y) (vs estimates of ₹6,468 crore), driven by a 14.4-per cent q-o-q decrease in volume and a 6-per cent q-o-q increase in ASP (led by price increase and product mix).
Reduction in raw material cost helped gross margin to expand 63 bps q-o-q to 24.5 per cent. The margin for the quarter contracted to 10.1 per cent (+11 bps y-o-y/-14 bps q-o-q). PAT increased 22.4 per cent y-o-y to ₹350 crore.
As most of the commodity benefits are largely over, we expect the margin for TVS Motors to peak out here. Further increase in the share of EVs also dents the margin expansion in the near to medium term.
Revival in rural and export markets is a key monitor-able for any positive surprise in the coming months. Moreover, entry-level MC is not out of the wood and the increase in interest rates is also impacting the prospects for recovery in the two-wheeler economy segment.
However, despite various challenges, TVS Motors is able to increase its market share in the two-wheeler segment. As most of the positives are already factored in the price, this leaves a limited upside opportunity.