Choice Institutional Equities has upgraded TVS Motor Company following strong Q2 FY27 results, where profit rose 52% year-on-year. The report highlights the company's ability to outpace industry growth through strong electric vehicle adoption and premium product sales. Investors may note the company's plan to ramp up EV production capacity as it faces stiff competition in the segment.
Choice Institutional Equities has updated its outlook on TVS Motor Company, upgrading the stock to a 'Buy' rating and setting a price target of Rs 4,900. This shift in sentiment follows a strong performance in the second quarter of the 2027 fiscal year, where the company reported a 44% year-on-year rise in revenue and a 52% increase in profit after tax.
The company’s ability to grow volumes has been a major factor in this performance. Total volumes reached 1.9 million units during the period, with domestic internal combustion engine sales growing 16%. This outpaced the wider industry growth of 10%. A significant portion of this success is linked to the company’s electric vehicle segment, which saw domestic sales surge by 129%, significantly higher than the industry's 84% growth. Electric scooters now make up about 22% of the company's scooter segment, helping the firm gain a larger share of the market.
Operationally, TVS Motor is managing its margins well despite ongoing industry challenges. The EBITDA margin expanded by 32 basis points to reach 13.0%. While the cost of raw materials increased by 1.9% sequentially, the company used price adjustments to protect its profitability.
To sustain this momentum, the company is preparing for further expansion. It plans to increase electric vehicle production capacity from the current 60,000–65,000 units per month to 80,000 units. Its long-term goal includes reaching a total two-wheeler capacity of over 8 million units annually, alongside a three-wheeler capacity of 0.4 million units.
However, investors should be aware of the competitive nature of the Indian two-wheeler market. TVS Motor faces intense rivalry from established players like Bajaj Auto and Hero MotoCorp, as well as aggressive EV-focused entrants like Ola Electric and Ather Energy. Any slowdown in consumer demand or a rise in commodity prices could pressure profit margins. Furthermore, while the company has outperformed industry trends, maintaining this growth rate will become more difficult as the base effect kicks in during the second half of the fiscal year.
The key monitorables for shareholders will be the company’s ability to execute its expansion plans and maintain its market share against both legacy competitors and new electric vehicle manufacturers in the coming quarters.