Among publicly traded two-wheeled (2W) incumbents, TVS Motor Co. Ltd had the highest market share of 4.3% in the Electric Vehicle (EV) segment in fiscal year 22, according to Vahan’s registration data. The company’s market share in the high-speed electric scooter segment was 19%, according to its Annual Report for FY22. Overall, electric vehicle popularity is increasing and new entrants have significant market share.

Bhavish Aggarwal, CEO of Ola Electric, which had a market share of 6.2% in the EV segment in fiscal 22, recently said it believes India will not sell 2W gasoline until the end of 2025. high risk for TVS as it receives a significant proportion of its revenues from the ICE Scooter segment.

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Analysts believe Aggarwal’s view is very optimistic, given the obstacles to EV deployment. The charging infrastructure has yet to be widely established, leading to range concerns. Concerns have also been exacerbated by recent 2W (e-2W) electric ignition.

In any case, TVS got off to a good start with the e-2W. “TVS Motor takes a holistic approach to the electric vehicle segment as it works on the entire ecosystem through partnerships and group companies. Accordingly, any reduction in the number of ICE scooters would be offset by an increase in the company’s electric vehicles, ”said Kumar Rakesh, an automotive and technology analyst at BNP Paribas Securities. Overall, TVS gained market share in the 2W segment in fiscal 22 compared to fiscal year 21. According to the Society of Indian Automobile Manufacturers, TVS’s domestic and export market share increased by 90 basis points (bp) and 120 basis points, respectively up to 15.2% and 24.5%. In addition, the company recorded an increase in margin thanks to effective cost control measures with high inflation and a better product mix, EBITDA’s margin in FY 22 was 9.4%, an increase of 90 bps y / y, while Bajaj Auto Ltd and Hero MotoCorp Ltd recorded a decline of 190 bp and 153 bp EBITDA margin, however investment growth in FY 22 meant negative free cash flow. TVS saw its investment in subsidiaries and associates grow approximately 3.3 times. 1,355.43 crore. Accordingly, TVS recorded negative free cash flow of more than 630 krorow.

“The rapid growth in investments and the poor profitability of the acquired entities are worrying. The company remains optimistic about its current investments. However, the profitability of the Swiss E-Mobility Group as well as of global OEMs remains uninspiring, ”Kotak Institutional Equities analysts said in a June 20 report. Swiss E-Mobility is a subsidiary of TVS.

TVS is optimistic about the business outlook in FY23 in the light of the expected recovery in rural demand and an increase in demand in cities as constraints are eased. Moreover, the prices of raw materials such as steel and aluminum are falling, which bodes well for margins. Meanwhile, TVS shares rose by nearly 21% over the last year, beating Bajaj Auto and Hero MotoCorp, whose shares fell by nearly 13% and 14%, respectively.

According to Bloomberg data, TVS shares are valued almost 22 times against the estimated gains for fiscal 24, while Bajaj Auto and Hero are trading 16 and 13 times respectively. According to Kotak, the valuation of cash flows inversely discounted implies a 25% share in the domestic market of the 2W segment, which is much higher than the current levels. They think achieving this is a daunting task for the company, so they have a stock sale rating. Sustainable volume growth will remain crucial. Note that the total 2W TVS volumes in April and May 2022 are 5.5% lower compared to 2019 levels.

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