Target: ₹1,696

CMP: ₹1,590.75

TVS Motor (TVSL)’s Q2-FY24 EBITDAM, at 11 per cent (up 50bps QoQ), was in line with consensus/our estimates. Gross Margin improved 60 bps QoQ despite a 200 bps increase in EV volume mix – benefit of which, we believe, got offset by higher S&M expenses driven by new launches. EBITDA/vehicle increased 5 per cent QoQ to ₹8,400/unit with ASP/unit remaining flat QoQ, which comes on the back of lower Apache mix, in our view. TVSL ramped up iQube’s production to 25k units/ month and plans to launch a series of products in the 5–25kW range by FY25-end.

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We revise our FY25E EPS by 10 per cent driven by increase in volume estimate by 4% and EBITDAM by 40bps. Maintain Add with a revised DCF-based target price of ₹1,696 (earlier ₹1,442), implying 25x FY25E core EPS. The increase in TP is led by higher earnings and rollover.

Downside risks: Rising competitive intensity in e2W along with reduction in FAME subsidy could pose a risk to profitability improvement of TVS; continuation of weak demand from target export markets; and higher than expected cash outflow w.r.t. investments and rising losses from subsidiaries.