TVS Motor shares: Goldman Sachs upgrades stock to Buy, sees 21% upside

Goldman Sachs has upgraded TVS Motor Company Ltd to 'Buy' from 'Neutral' to factor in superior volume visibility against peers, driven by upcoming premium products. The foreign brokerage said the two-wheeler maker is better placed to pass through raw material inflation and cited relatively limited volume impact from metal & brent crude inflation in prior cycles. Goldman Sachs sees a 35 basis points  margin tailwind for TVS Motor from the PLI scheme in FY28E against FY26.

The foreign brokerage said the key debates on TVS Motor shares have been around potential implications to  broader two-wheeler demand and production outlook amid the gas supply situation. Besides, debates are around premium motorcycle demand sensitivity to crude oil, implications to exports and freight rates from shipping route disruptions; and quantum of margin drag from the upcoming Norton motorcycle portfolio, along with aluminium inflation. 

"We raise our 12-month target price to Rs 4,100 Rs 3,830 prior, implying 21 per cent upside. We apply a 33 times (unchanged) P/E multiple on the core business (in line with 5 yr avg) to our Q5-Q8 EPS estimate, vs TVS' current 33 times forward P/E multiple (core business) and the historical peak of 39 times," TVS Motor said.

It said uts FY28 earnings per share and Ebitda estimates are 3-6 per cent above the consensus. 

Goldman Sachs expects 14 per cent, 11 per cent and 10 per cent volume growth for TVS Motor in FY27, FY28 and  FY29 against the industry growth of 7 per cent, 7 per cent and 5 per cent, respectively.

This drove Goldman Sachs' FY26- FY28 earnings per share growth revisions upward by up to 8 per cent. "TVS Motor screens as a top quartile volume growth beneficiary in our India Autos coverage universe, which should add upside optionality on relative valuation," it said.