Financial Highlights:

Q3FY25 Result Highlights
TVS Motors delivered a steady financial performance in Q3FY25. Total Sales volume grew 10.1% YoY and -1.3% QoQ to 12.12 lakh units. Consolidated revenue from operations grew 10.3% YoY and -1.4% QoQ, driven by healthy growth in the 2W and International Business and reflecting sustained demand across its product portfolio. A favourable product mix contributed to better-than-expected gross margins which came at 28.4% up 210bps YoY and 240bps ahead of expectations along with material cost reduction measures. EBITDA grew by 17% YoY and stood flat sequentially to Rs.1081 cr, recording the highest-ever quarterly EBITDA during the quarter. EBITDA Margins expanded by 68 bps YoY and 19 bps QoQ, which was mainly a flow-through from the gross margin improvement, driven by raw material cost saving initiatives. PAT stood at Rs.618 cr, up 4.2% YoY and -6.7% QoQ driven by higher sales volume and higher operational efficiency. PAT margins remained suppressed, contracting by 40 bps YoY and 38 bps QoQ, mainly due to elevated finance costs, which were up nearly 20% YoY at Rs. 33.75cr.

TVS Motor's overall two-wheeler and three-wheeler sales, including exports, grew by 10 percent to 12.12 lakh units during the quarter, up from 11.01 lakh units in the year-ago quarter. Among product segments, scooter sales surged 22 percent year-on-year to 4.93 lakh units, while motorcycle sales increased by 6 percent to 5.56 lakh units. However, three-wheeler sales declined to 0.29 lakh units from 0.38 lakh units in Q3 FY24. Electric scooter sales showed exceptional growth, rising 57 percent to 0.76 lakh units in Q3 FY25, compared to 0.48 lakh units in the same quarter last year, underlining the company’s growing focus on the EV segment.

Segmental highlights

2 Wheelers: TVS became the No. 1 player in the 2W space in India for the first time, after posting its December sales volumes in 2024.

Sales volumes for the 2W segment grew by 11% YoY and -1.3% QoQ, outperforming the industry’s 7% growth. Within this, the domestic 2W sales volumes grew by 8.6% YoY and -0.9% QoQ. The Motorcycle segment showed industry-leading volume growth YoY at 6.3% and was -0.7% QoQ. Scooter showed the best volume growth, rising 22% YoY and 0.6% QoQ. This is significant considering the base on which such growth is coming (i.e. 4.93 lac units vs 4.04 lac units YoY)

Electric Vehicle: EV sales showed very promising growth during the quarter, growing by 58.3% YoY and 1.3% QoQ to ~76,000 units. These sales figures are explained by i) An elevated demand for electric vehicles in the market, coupled with ii) an enhanced market presence, visibility, and reputation for TVS’s EV vehicles (Apache, Jupiter, Jupiter 125, iQube, Raider, Ntorq, the StaR Range, HLX, Radeon, TVS King, TVS Ronin), iii) PLI Qualification for TVS iQube, iv) Industry-leading capacity addition by TVS.

International Business: In Q3FY25, the total export volumes grew 18.2% YoY and -4.8% QoQ. Within that 2W exports grew by 26% YoY and -2.3% QoQ, while 3W exports saw degrowth of -32.5% YoY vs -27.6% QoQ.

3-Wheeler: Three-wheeler sales volumes saw sluggishness in Q3FY25, with sales volumes witnessing a de-growth by 35.1% YoY and 0.3% QoQ.

Key Conference call takeaways

Guidance: i) Capex guidance of Rs.1,200-1,400cr for FY25, ii) Can see double-digit sales growth in the export markets in FY25, iii) EBITDA Margins are expected to sustain and improve from the current 11.7% levels, (iii) Long term and short-term Investments to the tune of Rs 1700 cr will be made in FY25, (iv) Should expect better traction in EV sales and Export sales going forward.

EVs

• The EV revenue for Q3 stood at Rs.800 cr.
• The iQube is now available in over 900 dealerships.
• The company expanded its TVS iQube lineup by adding a new model, offering three battery types. All iQube models are PLI-approved, and PLI revenue for FY25 will be recognized in Q4, followed by quarterly recognition thereafter.
• Additionally, the company launched a new passenger E3W, the TVS King EV Max.

Pricing and OBD 2 norms

• The company applied only a slight price increase during Q3, while the commodity basket stayed stable.
• The company plans to implement competitive price increases, which will be more moderate compared to the significant hikes seen during the transition from BS4 to BS6.

Domestic Demand

• Expect growth momentum to continue in FY26.
• Rural growth outpaced urban markets, growing at a slightly higher rate of ~10% vs 9% for the
• overall retail 2W market.
• Favorable agricultural conditions in the country, including reservoir levels, rainfall expectations, and crop outlook are expected to support demand going forward.
• TVS maintains a network of approximately 1,400 main dealers, including branches, with plans for further expansion.

International Markets/Exports

• African markets showed improvement, with healthy expectations for Q4.
• LATAM also performed well with consistent MoM growth.
• Nepal and the Middle East continued their healthy performance.
• Bangladesh faces challenges, while Sri Lanka’s reopening is a positive development for the region’s sales.

Product Pipeline and New Partnerships

• Norton Motorcycles is poised for new product launches in FY26, focusing on the super-premium segment.
• Collaboration with Hyundai on electric 3-Wheelers emphasizes micromobility, with updates on project timelines and product positioning to come through going forward.
• Announced the entry into the 3W cargo segment, FROM ITS Hosur plant with an initial capacity of 5000/units per month.
• TVS invested Rs. 1,400 crores in the first nine months of FY25 for product development, with a full-year projection of Rs. 1,700 crores. A similar investment rate is anticipated for FY26.
• Investments are focused on product readiness, e-bikes, new technology via TVS Singapore, and setting up a new international hub in Dubai to tap into opportunities in Africa, the Middle East, and Europe.

Capex & Investments

• The capex in Q3 was Rs.340 cr
• The projected FY25 Capex of Rs. 1,300 crores.
• Investments into product development for FY25 guided at Rs.1,700cr. A similar amt expected in FY26.
• Capex: Guided for capex for FY25 of Rs.1300 cr and investments of Rs.1700 cr.

TVS Credit

• TVS Credit added 3 million new customers during the quarter, with its book size
• reaching ₹270.2 billion, growing 7% YoY
• Its gross NPA stands at 3%.
• There are no signs of a slowdown, but the company has implemented stricter credit norms. The management is vigilantly monitoring consumer loan delinquency rates, diversifying its portfolio to minimize risk, with no major distress signs presently observed.

Other Key Points

• Sale of Sundaram Auto Components (plastics business) will lead to cash generation and land merger with TVS Motor Company, though business or revenue will not be transferred.
• TVS Motor Company is Sudaram Auto Component’s largest customer.
• The USDINR realization for Q3FY25 was Rs.84.

Outlook & valuation

TVS Motors reported steady numbers for the quarter ended Q3FY25. However, we believe that TVS Motors has emerged as a major beneficiary of the industry's transition towards the 125cc+ segment, where it has established a strong presence. The contribution of its 125cc+ segment to domestic motorcycle volumes has notably increased from 55% in FY19 to 72% in FY24. We anticipate that TVS Motors will sustain its pace of volume growth, outpacing the broader domestic 2W industry, with an expected 11% volume CAGR over the next two years, compared to the industry's CAGR of 8-9%. This growth trajectory is expected to be driven by the continued demand for its existing products in the 125cc and new product launches.

The recently launched Jupiter 110 has been very well received by customers and is likely to help TVSL gain a share in scooters in the coming quarters. However, in motorcycles, for the first time in many years, TVSL has underperformed the industry in FY25 YTD. More importantly, TVSL has underperformed in the 125cc segment, which has been its key growth driver in recent years. Additionally, while there is a recovery in the export market, its full recovery is yet to be realized.

TVS Motors has been playing multiple products in numerous segments to build a sustainable business model, which we believe helps the company to capture growth coming in various sub-segments at different points in time. TVS Motors continues to aim to expand its penetration in the premium segment. Going forward, TVS Motors aims to expand its EV product portfolio in the domestic as well as in overseas markets. The company continues to emerge as the key beneficiary of the rising premiumisation in the domestic motorcycle segment. At a CMP of Rs.2464, the stock is trading at 36x FY26E. We maintain a HOLD rating on the stock.