TVS Motor also suffered a similar fate as other mid-caps with the stock plummeting more than 25% from its high of Rs.767 in January 2018 despite strong sales volume performance. TVS Motor’s volume surged by 32% YoY driven by the success of new Apache, Jupiter and NTORQ (see: High burn). However, higher input cost, increased dealers’ margins and one-time promotional expenses hit the margins and possibly spooked investors. Despite Q4FY18 being a better quarter for its motorcycle segment, margins fell below the previous quarter.
But analysts believe that the rising cost of raw materials should not perturb investors anymore as the company has implemented two consecutive price hikes in April and May to pass on the inflation cost and dealers’ incentive to consumers. “When there is strong demand in the market for a company’s models, it has a decent pricing power. TVS’ sales volume reflects the demand for its models and the company has already taken the price hike for majority of models in the month of April and May into account. These would take care of the major portion of cost inflation,” says Mitul Shah, vice-president — research, Reliance Securities.
The depreciating rupee is also expected to support margins as the company outperformed the industry in exports. Export volume grew by 49% YoY to 160,994 units due to a 50% and 82% rise in two-wheeler and three-wheeler volume, YoY, respectively.
Rich product mix and strong brands are expected to help TVS Motor ride the rural consumption growth story. “We envisage double-digit volume growth for the company fuelled by improving rural demand and favourable monsoon. TVS is better placed in the domestic two-wheeler space with Our work is exclusively for discerning readers. To read our edgy stories and access our archives, you’ve to subscribe
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