TVS Motor Company: Margin Stability, EV Momentum & Capacity Expansion Keep Long-Term Outlook Strong

CMP: Rs. 3,522 | Target Price: Rs. 4,267 | Upside Potential: 21% | Rating: BUY

TVS Motor Company delivered a steady operational performance in Q4FY26 despite persistent commodity inflation and rising input costs. The company continued to gain market share across motorcycles, scooters, EVs and exports, while maintaining EBITDA margins through better product mix, premiumization and currency support.

The management commentary remained constructive, highlighting continued growth outperformance over the industry, aggressive capacity expansion plans and sustained investments in technology and EV development.

At current levels, TVS continues to command premium valuations, supported by strong execution, healthy cash generation and improving profitability metrics.

Investment Summary

Parameter Details

CMP Rs. 3,522
Target Price Rs. 4,267
Upside Potential 21%
Recommendation BUY
FY26 Revenue Rs. 472.7 billion
FY26 EBITDA Rs. 60.8 billion
FY26 Adjusted PAT Rs. 36.5 billion
FY26 RoE 34.4%
FY26 RoCE 39.5%
FY28E EPS Rs. 112.4
Target Valuation 35x FY28E EPS

Q4FY26 Performance Snapshot

Particulars Q4FY26 YoY Change

Revenue Rs. 128.1 billion +34%
EBITDA Rs. 16.8 billion +26%
PAT Rs. 10 billion +17%
EBITDA Margin 13.1% Stable QoQ
Total Volumes 1.56 million units +28.3%
Motorcycle Growth — +23%
Scooter Growth — +32%
3-Wheeler Growth — +65%
EV Volumes 115,000 units +51%

Key Positives from Quarterly Results

• TVS recorded its highest-ever quarterly sales volume at 1.56 million units

• Scooter and EV businesses continued to outperform industry growth trends

• EBITDA margins remained resilient despite elevated steel, aluminum and energy costs

• Strong product mix and favorable currency movements helped offset commodity inflation

• Premium motorcycle portfolio and EV penetration continued to improve realization profile

• Free cash flow generation remained healthy with positive operational cash flow

Operational Highlights

Segment Observation

Motorcycles Strong rural and premium demand support
Scooters Continues to outperform peers
Electric Vehicles 51% YoY growth despite rare earth magnet constraints
Exports Steady recovery across key international markets
3-Wheelers Strong growth momentum continues
Margins Mix improvement helping profitability stability

Management Commentary – Key Takeaways

Management expects FY27 industry growth to remain in the high single-digit range while maintaining confidence in outperforming industry growth across domestic and export markets.

The company expects scooters, EVs and premium motorcycles to remain the primary growth engines, while entry-level motorcycles may continue to face pressure due to inflation and fuel costs.

Commodity inflation currently remains elevated at around 3-5% of revenue, driven by:
• Steel
• Aluminum
• Crude-linked inputs
• Energy costs

TVS has already offset nearly 35% of this inflationary impact through calibrated price increases and product mix improvements.

Capacity Expansion & Investment Plans

Expansion Plan Details

Additional Capacity 1.5 million units
Total Capacity Target 8.3 million units
FY27 Capex Rs. 35 billion
Technology/Product Investment ~Rs. 20 billion
Manufacturing Expansion Over Rs. 10 billion

Management also indicated that strategic investments may moderate slightly in FY27 as multiple projects move toward commercialization phase.

Financial Performance Trend

Financials (Rs. Billion) FY26 FY27E FY28E

Sales 472.7 544.5 635.8
EBITDA 60.8 68.1 85.8
Adjusted PAT 36.5 41.6 53.4
EPS (Rs.) 76.7 87.6 112.4

Growth Expectations

Metric FY26-28 CAGR

Revenue 16%
EBITDA 19%
PAT 21%

Balance Sheet & Return Ratios

Ratio FY26 FY27E FY28E

RoE 34.4% 32.1% 31.5%
RoCE 39.5% 36.1% 37.1%

TVS continues to remain among the strongest return-ratio stories within the Indian two-wheeler space.

Valuation Snapshot

Valuation Metric FY26 FY27E FY28E

P/E (x) 45.9x 40.2x 31.3x
P/BV (x) 14.9x 11.4x 8.7x
Dividend Yield 0.3% 0.4% 0.5%

Although valuations remain premium versus peers, the company’s:
• EV leadership
• premiumization strategy
• strong execution
• market share gains
• healthy return ratios

continue to justify higher multiples.

Shareholding Pattern

Category Mar-26

Promoters 50.3%
DII 18.8%
FII 22.6%
Others 8.3%

Chanakya View

TVS Motor continues to strengthen its position as one of India’s most execution-focused two-wheeler companies with improving brand strength across premium motorcycles, scooters and electric vehicles.

Despite elevated commodity inflation and macro uncertainty, the company managed to protect margins while delivering strong volume growth and maintaining healthy return ratios.

Its continued investments in EV technology, premium products and manufacturing expansion indicate management’s confidence in long-term demand visibility.

Key long-term positives remain:
• Strong EV growth trajectory
• Capacity expansion
• Premium product pipeline
• Export recovery
• Healthy cash generation
• Sustained market share gains

At current levels, valuations remain expensive versus traditional auto peers, but premium multiples may continue as long as TVS sustains industry-leading growth and execution consistency.

👉 Long-term bias remains positive

👉 EV, scooters and premium motorcycles remain key growth drivers

👉 Any correction toward broader market weakness may offer accumulation opportunities for long-term investors

👉 TVS continues to remain one of the strongest structural growth stories in the Indian auto sector.