TVSMOTOR - TVS Motor Company Ltd. Share Price

In the Q3 FY '26 earnings call, management of TVS Motor Company presented a strong outlook, driven by record growth in sales and profitability. Key highlights included a 27% increase in sales volume, 37% revenue growth to INR 12,476 crores, and substantial rises in operating EBITDA and profit before tax (PBT) of 51% to INR 1,634 crores and 57% to INR 1,315 crores, respectively.

Looking ahead to Q4 FY '26, management expressed confidence in continuing robust growth, expecting the industry to maintain a growth rate of around 15%. They noted favorable signals from a thriving rural market, with improved disposable incomes due to good rainfall contributing to agricultural prosperity. Additionally, they highlighted GDP growth expectations of about 7%, supported by the recent 125 basis points cut in repo rates by the RBI, fostering a positive liquidity environment.

Management also discussed their strategy for electric vehicles, with EV penetration reaching approximately 32% in Q3. They expect this number to rise further due to improved supply of key components like magnets. Significant growth is anticipated for their electric offerings, particularly with the launch of models like the iQube and Orbiter.

On international markets, growth is projected to persist, particularly in Africa and Latin America, where demand remains strong. The export segment showed a 23% growth compared to the previous year, indicating solid momentum.

Investment plans have been revised upwards to INR 2,900 crores, with a significant allocation towards the Norton brand, which is poised for entry into the premium motorcycle segment. Management reiterated their commitment to enhancing product mix and cost reduction strategies to sustain margins, rooted in the strength of their diversified portfolio and continued focus on consumer preferences.

1. Question: "Just want to understand if there's some upside risk to that in your view over the medium term, if you see upside risk to this 8% to 10% kind of growth bracket for the 2-wheeler industry?"

Answer: "Definitely, GST is positively impacting growth. I predict Q4 will see growth upwards of 15%. While the first half experienced only 2% growth, year-end should reflect around 9%. The exit rate indicates strong momentum, benefiting the 2-wheeler industry significantly."

2. Question: "What are the offsets available to the company to manage the commodity inflation? Have we taken any price hikes in the December quarter as well as the March quarter to date?"

Answer: "Commodity prices are rising in metals like aluminum and copper, but we effectively manage costs through scale and a cost-reduction program. We've implemented about 0.2% to 0.3% price hikes recently. Our strategy includes balancing growth momentum while selectively passing on costs."

3. Question: "If you can just help us understand what are the categories across both urban and rural you are seeing volume growth being driven from?"

Answer: "Scooters have excelled, with our category share around 40%. Premium and super-premium segments are also growing quickly. Urban areas are showing about 21% growth, while rural is at 19%. Infrastructure improvements in rural areas are boosting scooter and premium segment sales."

4. Question: "If you could share the international business revenues and the spare parts revenues, please?"

Answer: "International business revenues this quarter reached about INR2,909 crores, while spare parts produced total revenue around INR1,183 crores. These figures reflect strong performance on both international sales and parts distribution."

5. Question: "Any thoughts on the export market?"

Answer: "Exports are performing well with expectations that Q4 will maintain this trend. Growth in Africa and Latin America, along with a recovery in Sri Lanka's market, contributes to our confidence in outperforming the industry in exports for Q4."

6. Question: "Is there any one-off or anything you would like to call out in that?"

Answer: "Most increased other expenses relate to variable expenses tied to volume growth, especially marketing for our new products, which added about INR60 crores this quarter. Other expenses like packing and freight followed the increase in volume demand."

7. Question: "Could you specify how the EV portfolio is performing and the future profitability potential?"

Answer: "Both iQube and Orbiter are performing exceptionally well, with positive reception. We're on track towards EBITDA positivity as volumes grow, aiming for a steady increase in contribution from the EV segment as the market continues to expand."

8. Question: "Can you provide us with the capacity numbers for EVs?"

Answer: "Currently, we're producing about 30,000 to 32,000 units of iQube monthly and around 10,000 for the Orbiter. We're reviewing capacity increases in response to demand, and I will share more concrete plans in future calls."

9. Question: "What were the investments this quarter, especially regarding Norton?"

Answer: "This quarter, we invested approximately INR900 crores, which includes INR200 crores in TVS Credit and an incremental INR60-70 crores in pre-launch marketing for Norton. Our investments focus on strategic growth areas including technology and brand development."

10. Question: "What is your perspective on fiscal '27 growth expectations?"

Answer: "I project steady demand growth into fiscal '27 driven by factors like improved infrastructure and mobility needs. A long-term CAGR growth of around 8% to 9% seems realistic, supported by continued economic growth and positive industry sentiment."