Prabhudas Lilladher (PL Capital) has reiterated its ‘ACCUMULATE’ rating on TVS Motor Company with a revised target price of Rs 3,950, following a strong Q4FY26 performance marked by resilient volume growth, margin expansion, and continued momentum in premium motorcycles, scooters, and electric vehicles. While profit after tax slightly missed expectations due to weaker non-operating income, operational performance remained robust. The brokerage believes TVS Motor is entering a structurally stronger growth phase driven by exports, EV penetration, premiumization, and aggressive capacity expansion. Management remains cautiously optimistic despite commodity inflation, geopolitical uncertainty, and supply-chain disruptions. PL expects the company’s earnings trajectory to remain healthy over FY26-FY28.

PL Capital Retains ‘ACCUMULATE’ Rating With Revised Target of Rs 3,950

PL Capital maintained its positive stance on TVS Motor Company after the automaker delivered another quarter of strong operational execution. The brokerage revised its target price downward from Rs 4,150 to Rs 3,950, largely reflecting valuation recalibration and modest earnings estimate cuts for FY27 and FY28.

The brokerage now values the stock at 35x FY28 estimated earnings, while also assigning additional value to TVS Credit Services. Despite the reduced target, analysts continue to view the company as one of the strongest structural growth stories within the Indian two-wheeler space.

Revenue Growth Remains Impressive Despite Base Normalization

TVS Motor reported standalone operating revenue of Rs 128.1 billion in Q4FY26, registering growth of 34.1% year-on-year. Adjusting for the impact of PLI benefits in the previous year, the revenue trajectory remained exceptionally healthy.

Volumes rose sharply to 1.56 million units during the quarter, reflecting a 28.3% increase from the year-ago period. Net realization per vehicle improved 4.5% YoY to Rs 82,077, highlighting the company’s continued premiumization strategy and stronger contribution from higher-value products.

The company’s full-year FY26 revenue surged 30.4% to Rs 472.7 billion, supported by strong demand across motorcycles, scooters, electric vehicles, and international markets.

Margins Surprise Positively Despite Commodity Pressures

One of the biggest positives from the quarter was TVS Motor’s EBITDA margin resilience. EBITDA margin stood at 13.1% during Q4FY26, outperforming analyst estimates by roughly 25 basis points despite rising commodity pressures.

EBITDA climbed 26.2% YoY to Rs 16.8 billion, driven by scale benefits, product mix improvement, and disciplined cost management. Although gross margin softened due to raw material inflation, lower manufacturing and operating expense ratios supported profitability.

PAT Misses Estimates Due to Lower Other Income

Despite strong operational performance, adjusted PAT came in slightly below Street expectations. Adjusted profit stood at Rs 9.98 billion, growing 33% YoY but missing Bloomberg and PL estimates by 1.3% and 4.3%, respectively.

The miss was largely attributed to lower-than-expected non-operating income, primarily linked to fair-value losses on investments. Nonetheless, the core automotive business remained fundamentally strong.

Electric Vehicle Strategy Continues To Gain Momentum

TVS Motor continues to aggressively expand its electric vehicle ecosystem. Management stated that e-two-wheelers grew 38% YoY during Q4FY26, materially outperforming the broader industry.

EV penetration across scooters improved steadily, while production capacity increased from approximately 30,000-32,000 units per month in FY26 to nearly 40,000 units monthly. The company now aims to scale production to 50,000 units per month.

The company has also rolled out Battery-as-a-Service (BaaS) across its EV portfolio, a move expected to improve affordability and accelerate adoption.

Additionally, TVS’ partnership with Hyundai for electric three-wheelers could emerge as a long-term profitability lever. Management expects e3W expansion to support EBITDA improvement over time.

Exports and International Markets Becoming Key Growth Engines

International operations are emerging as a major strategic growth pillar for TVS Motor. The company highlighted particularly strong traction across Latin America, Africa, the Middle East, Nepal, and Sri Lanka.

Management indicated that market share gains are accelerating in several export geographies, with export revenue reaching nearly Rs 30 billion during the quarter. The company also confirmed that e-scooter exports have already commenced in select Asian markets.

Despite logistics disruptions and increased transit lead times globally, TVS expects export growth to remain ahead of industry averages in FY27.

Massive Capacity Expansion and Investment Pipeline Underway

TVS Motor is entering a heavy investment cycle aimed at reinforcing long-term growth leadership. The company plans capital expenditure of nearly Rs 35 billion during FY27.

This includes:

Management also confirmed that total manufacturing capacity will rise by 1.5 million units over the next 12 months, taking installed capacity to 8.3 million units annually.

Commodity Inflation and Rural Weakness Remain Key Risks

While management remains optimistic, near-term headwinds continue to persist. The company expects commodity inflation equivalent to 3-5% of revenue during Q1FY27, driven mainly by steel, aluminium, and crude oil derivatives.

TVS has already offset nearly 35% of the inflationary impact through selective price hikes. Additional mitigation strategies include premiumization, operational efficiencies, and cost rationalization initiatives.

However, risks linked to geopolitical tensions, supply-chain disruptions, manpower shortages at Tier-II suppliers, and potentially weak rural demand due to below-normal rainfall remain important monitorables for investors.

Financial Outlook Suggests Sustained Earnings Momentum

PL Capital expects TVS Motor to deliver strong compounded earnings growth over FY26-FY28. The brokerage projects:

The brokerage estimates FY28 EPS at Rs 110.4, while return ratios are expected to remain exceptionally healthy, with projected FY27 RoE above 33%.

Technical Levels and Investor Strategy

TVS Motor remains structurally strong from both a business and market positioning perspective. The stock currently trades around Rs 3,527, while PL Capital’s revised target stands at Rs 3,950, implying meaningful upside potential over the medium term.

Key levels investors should monitor:

Investors with a medium-to-long-term horizon may continue accumulating the stock on declines, especially given TVS Motor’s strengthening EV franchise, export momentum, premiumization strategy, and improving operational leverage.