TVS Motor Co. Shares Q3 Results

For the quarter ended Dec-21, TVS Motors saw higher revenues. However, while the offtake of motorcycles and even exports were higher on YoY basis, the sales of scooters were sharply lower on YoY basis. The operating performance tapered due to pressure on the inventory costs amidst the microchip shortage plaguing the auto industry. The redeeming feature was financial services of the group.

Here is a Gist of TVS in Numbers
 

Let us start with the top line of TVS Motors first. TVS Motor Co reported 8.24% growth in total sales for the Dec-21 quarter at Rs.6,597 crore on a YoY consolidated basis. During the December 2021 quarter, total two wheeler sales were lower -12.3% at 8.35 lakh units and this was largely on account of weak scooter sales. On a sequential basis, the revenues of TVS Motor Co were up by 1.76%. 

Let us now look at a granular break-up of sales numbers. Clearly, the pressure on the sales numbers came from scooters. For instance, exports grew 12% YoY while motorcycle sales were up 4.7% at 4.46 lakh units. However, scooter sales fell by -17.7% at 2.56 lakh units largely on account of the direct impact of the shortage of microchips shortage leading to higher inventory costs. Three wheeler sales were marginally higher in Q3 on a YoY basis.

Let us now turn to operating performance of TVS Motors. For the Dec-21 quarter, the overall profits from operations were down on a YoY basis by -3.93% at Rs.580 crore. This was largely because the automobile segment saw a spike in its inventory costs due to the microchip shortage forcing more investments locked up in inventory cycle.

In terms of specific verticals, the automotive vehicles business saw -6.2% fall in EBIT at Rs.346 crore while automotive components dipped into an operating loss. The situation was helped by financial services which saw EBIT grow 30% at Rs.73 crore in Q3. Operating margins tapered due to higher inventory costs depressing OPM from 9.90% in Dec-20 quarter to 8.79% in the Dec-21 quarter. OPM was higher on a sequential basis by 19 bps.

Net Profits for the Dec-21 quarter were lower by -12.66% YoY at Rs.247.75 crore due to the impact of the operating pressures getting transmitted to the bottom line. PAT margins tapered from 4.65% in the Dec-20 quarter to 3.76% in the Dec-21 quarter. However, PAT margins were almost flat on a sequential basis. Overall, it is apparent that the net margins of TVS Motors is among the lowest in the two-wheeler industry in India.