TVS MOTOR (-) : 4QFY26 first take - In-line quarter, subsidiary losses widen

研报英文原文证据摘录

TVS MOTOR (-) : 4QFY26 first take - In-line quarter, subsidiary losses widen

Refinitiv

Investment case, valuation and risks

TVS Motor (Underperform, Target Price INR2,300)

Investment case

TVSL has exhaustive EV strategies, in our view. However, capital allocation remains a

concern for us, given aggressive ongoing investments in subsidiaries, some of which

are loss-making. The business is struggling to generate FCF, and we fail to see a path

to profitability for several of the large investments being made by the company. While

the company continues to deliver strong growth, we remain concerned as subsidiaries'

losses are widening and targets for investments in subsidiaries and capex are further

raised keeping FCF generation challenging. With solid earnings growth not translating

to FCF generation, we find TVSL' P/E valuation expensive.

Valuation methodology

In our valuation, we value the ICE and EV businesses separately to better capture the

slowing growth of the profitable ICE portfolio and accelerating growth of its loss-making

EV portfolio. We value the ICE business of TVS Motor at 20.0x Mar-28E EPS. Our target

multiple is 1SD below the standalone entity's past five-year mean NTM P/E (based on

Bloomberg consensus estimates) as we see the ICE business growth slowing down in

the coming years. We value the EV business at 2.2x Mar-28E Price/Sales. Our EV

business target multiple is close to the median of global EV companies' market

cap/revenue during their higher growth phase. In our valuation, we include its financing

arm, TVS Credit, valued at a 20% holdco discount to the average valuation determined

in the last funding round. We also value its investments in Rapido and Ultraviolette, at

20% holdco discounts to their average valuation determined in the last funding.