Momentum Pick: Will current triggers help TVS Motor stock take a fresh leap?

TVS Motor Company stock has been on an upward trend and the prospects remain bright for this counter. The ongoing momentum got a boost from the company’s Q4FY23 earnings figures, which were better than estimated. The stock of this Chennai-headquartered company has gained nearly 95% in 1 year, outperforming the Nifty50 which has given over 11% returns during the period. A further upside is seen on this stock based on a host of technical and fundamental triggers.

TVSM is the flagship company of TVS Group and the third largest two-wheeler manufacturer in the country. TVSM is the only manufacturer present across all three categories of two-wheeler, viz. motorcycles, scooters, and mopeds. TVSM also manufactures three-wheelers mainly for the export market.

TVS Motor shares ended at Rs 1,228.20 on the NSE and were up by Rs 13.25 or 1.09% from the Friday closing price.


Technical View
“The stock has been consolidating within Rs 1,180 - Rs 970 levels since October 2022. However, with the current week's strong up move, the stock has confirmed this ‘consolidation’ breakout on a weekly closing basis,” said Rajesh Palviya, Senior Vice President - Technical and Derivatives Research at Axis Securities.

This price formation also resembles the "rounding bottom" pattern forming a series of higher tops and bottoms across all the time frames, which ensures the continuation of the uptrend, this analyst said.

Palviya emphasised that the breakout is accompanied by huge volumes indicating increased participation in the breakout. The stock is also well placed above its 20,50, 100, and 200-day SMA, which reconfirms a bullish trend, he added.

“The daily and weekly band bollinger buy signal indicates increased momentum near the all-time territory. On the downside, Rs 1,185-1,100 remains a crucial support zone,” said Palviya.

Fundamental View
Sharekhan: Buy | Target: Rs 1,303 | Upside
Sharekhan maintains a ‘buy’ rating on TVS Motor for a price target of Rs 1,303 banking on the likelihood of 24.5% earning over FY23-25E, EBITDA margin expansion and successful entry in the electric 3-wheeler space.

The two-wheeler major is also likely to benefit from introduction of EVs in the export market and recovery in export volumes in the medium term, the domestic brokerage said.

Management’s commentary on further expansion in EBIDTA margin despite a weak export mix and muted volume performance, raises hope, maintained Sharekhan.

Recently launched products Ronin has been well accepted in the market and the company continues to aim to expand its penetration in the premium segment, the brokerage noted. It is also expected to continue to perform strongly and gain market share in international markets, the brokerage said further.

“Post Q4FY23 performance, we build up 24.5% earning CAGR backed by 8.9% Volume CAGR and 140 bps EBITDA margin expansion over FY23-25E,” Sharekhan said.

Key Risks
1. Raw material price escalations on the back of geopolitical tensions and supply constraints.

2. Continued headwinds in the export market may impact its performance adversely.