TVS Motor gains 5%, hits over 8-month high ahead of September sales data

Shares of TVS Motor Company gained 5 per cent to over eight-month high of Rs 490 on the BSE on Thursday ahead of September sales data. The stock of two and three-wheeler manufacturer was trading at its highest level since January 17, 2020. It hit a 52-week high of Rs 503 on October 31, 2019.

TVS Motor Company's sales in August 2020 grew by 14 per cent over July 2020 and flat on year-on-year basis. The company sold 287,398 units in August as against 252,744 units in July 2020. It had sold 290,455 units in the month of August 2019.

The company has a strategic partnership with BMW Motorrad to develop and manufacture sub-500cc bikes both for domestic and global markets.

The favorable reservoir levels, good rabi output and possibility of normal monsoon may support agriculture growth. It is to be noted that much of the sale of two wheelers are in semi urban and rural areas which could see some benefit of this.

Global two-wheeler (2W) exports are largely dominated by China; India is the fourth largest exporter of 2Ws in the world. As automotive supply chains have started to move away from China and countries have started to impose trade restrictions on China, India and Thailand are emerging as alternative low-cost suppliers of 2Ws to the world. This is an opportunity for major 2W OEMs in India, according to analysts at JM Financial Institutional Securities.

The brokerage firm expects TVS Motor's margins to improve going ahead supported by improving profitability. Return ratios have been declining over the past two years (RoE from 25 per cent in FY18 to 17% in FY20) driven by a) BS6-related depreciation of assets and b) higher interest expenses. However, we expect the return ratios to bounce back to original levels as operating performance improves and depreciation related to major regulatory transitions is behind us, it said.

At 01:31 pm, TVS Motor was trading 3 per cent higher at Rs 485 on the BSE, as compared to 1.4 per cent rise in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 3.9 million equity shares changing hands on the NSE and BSE.