Axis Securities has reiterated a BUY call on TVS Motor Company, raising its target price to Rs 4,165, following a strong Q3FY26 operational performance marked by robust export growth and accelerating electric-vehicle scale-up. While revenue and EBITDA exceeded expectations, PAT came in marginally below estimates due to one-offs. The brokerage sees TVS as a rare blend of volume growth, margin expansion, and disciplined capital allocation in India’s two-wheeler space. With exports, EVs, and premium motorcycles driving momentum, TVS is positioned to outpace industry growth through FY28.

Axis Securities’ Investment Call and Valuation Framework

Axis Securities has reaffirmed its BUY recommendation on TVS Motor Company Ltd., upgrading its target price to Rs 4,165 per share from Rs 4,000 earlier. The valuation is anchored on a 34x P/E multiple applied to core FY28E earnings, alongside a conservative treatment of non-core investments at 1x P/BV and TVS Credit Services at 1.5x P/BV.

At the current market price of Rs 3,719, the revised target implies an upside of approximately 12%, reflecting the brokerage’s conviction in TVS’s structural growth drivers and improving profitability profile.

Q3FY26 Performance: Revenue and Margins Lead the Beat

TVS Motor delivered a solid operational quarter in Q3FY26, with net revenue rising 37.1% year-on-year and 4.8% sequentially, driven by strong volume growth and improved realizations. Total volumes increased 27.4% YoY, supported by both domestic demand recovery and a sharp rebound in exports.

EBITDA rose 51.1% YoY, materially outperforming estimates, aided by gross margin improvement and tighter control over personnel and other operating expenses. EBITDA margin expanded to 13.1%, an improvement of 121 basis points YoY.

Net profit grew 52% YoY, though it came in marginally below Axis Securities’ expectations due to higher depreciation, interest costs, and a fair-value loss on investments during the quarter.

Segmental Strength: Exports Emerge as the Primary Growth Lever

Exports continued to be the standout driver, with overseas volumes growing 35% YoY, significantly ahead of the industry’s ~23% growth. Africa showed a steady recovery, Sri Lanka rebounded sharply, and Latin America emerged as a meaningful white space for incremental market share gains.

Export momentum is no longer a cyclical tailwind but a structural pillar for TVS, contributing increasingly to both volume mix and revenue quality. Axis Securities believes this export diversification reduces earnings volatility and enhances margin resilience over the medium term.

Electric Vehicles: From Scale to Profitability Inflection

TVS Motor’s electric-vehicle strategy gained tangible traction in Q3FY26. EV two-wheeler sales crossed 1.1 lakh units, registering 40% YoY growth. The iQube continues to see strong demand, while the newly launched TVS Orbiter is ramping up rapidly, with management guiding toward 10,000 units per month in the near term.

Crucially, EV operations are already contribution-positive, supported by operating leverage and a ~70 bps margin benefit from the PLI scheme. Axis Securities expects EV margins to trend toward EBITDA neutrality as scale improves, making EVs an earnings accretive growth engine rather than a drag.

Norton Motorcycles: Laying the Groundwork for Global Premium Expansion

TVS Motor is advancing Norton Motorcycles as its global super-premium flagship brand, with a planned launch targeted for calendar year 2026. Norton will cater to affluent global customers, while following a differentiated go-to-market strategy in India.

Entry into the super-premium motorcycle segment is expected to be margin-accretive over the medium term, while also enhancing TVS’s global brand equity, technological capabilities, and premium credentials. Axis Securities expects Norton to begin contributing meaningful revenue from H2FY27 onwards.

Domestic Demand Outlook: Rural Recovery and Premiumisation

Management commentary points to a constructive domestic demand outlook across both rural and urban markets. Rural sentiment is expected to improve on the back of a favorable monsoon, easing retail financing conditions, and improving farm incomes.

Within the product mix, scooters and premium/super-premium motorcycles are growing faster than entry-level segments. During Q3FY26, domestic scooter sales rose 25.3% YoY, while motorcycle sales increased 24.9% YoY, underscoring the ongoing premiumisation trend.

Financial Snapshot: Key Numbers That Define the Trajectory

Axis Securities has revised its FY26–FY28 earnings estimates upward, reflecting stronger volume assumptions, EV scale benefits, and sustained export momentum.

Cash Flows, Balance Sheet, and Capital Allocation

TVS Motor continues to demonstrate disciplined capital allocation. Operating cash flows are expected to rise from Rs 4,424 crore in FY26E to Rs 6,409 crore in FY28E, supporting both organic expansion and strategic investments.

Planned capex for FY26 stands at approximately Rs 1,700 crore, focused on EV capacity, product development, and premium platforms. The balance sheet remains strong, with declining leverage and a steadily rising cash balance projected through FY28.

Key Risks to Monitor

Despite the positive outlook, Axis Securities highlights certain risks that warrant monitoring:

• Commodity Cost Volatility: Steel and rare-earth magnet prices remain a near-term risk, particularly for EV components.
• Global Macro Exposure: Currency volatility and debt stress in export markets could impact overseas demand.

These risks, however, are partially mitigated by TVS’s diversified geographic footprint and improving product mix.

Final Verdict: A Structural Compounder in Indian Autos

Axis Securities views TVS Motor as a rare volume + margin + capital discipline story within the Indian two-wheeler universe. With double-digit EBITDA CAGR, deepening EV penetration, a resurgent export franchise, and a credible premium global play via Norton, the company is well-positioned to compound earnings through FY28.