TVS Motor Q2 Results Review - Margins Resilient Despite Inflated Staff Expenses: Yes Securities

Yes Securities Report

TVS Motor Company Ltd.'s Q2 FY25 results was mixed bag as average selling price decline of 2.5% QoQ (-0.9% YoY) at Rs 75.1k/unit (estimate Rs 77.8 k/unit) came in as surprise despite price hikes and favorable mix.

This was led by launch of iQube 09 variant at lowered price point. However, margins continue to be resilient at 11.7% (+70 bp YoY/ +20 bp QoQ). Gross margin expanded ~250 bp YoY (-10 bp QoQ) at 28.5% partially offset by higher employee cost which grew ~26.4% YoY due to;

1. new manpower addition of ~250 each in electric, software and digital initiatives and

2. ESOP provision of Rs 110-120 million.

Key operating metrics such as Eitda/vehicle remain elevated at ~Rs 8800/unit (+5% YoY/ -0.5% QoQ). The management indicated rural/semi-urban markets are performing better versus urban (we have been indicating the trend since last two-three quarters in our channel check note).

We continue to believe TVS Motor is better placed among two-wheeler OEMs both in ICE and EVs led by better product acceptability which should drive further market share gains.

However, we would remain watchful of the TVS Motor’s market share in the 125cc segment and market share thereof.

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