Brokerage firm Nomura upgraded TVS Motor to “buy” from “neutral” and raised its target price by 53% to Rs 1,382 from Rs 903.

The stock is trading at Rs 1,112.35, so the upside is around 24%. The improvement in sentiment was mainly due to the company’s new product launches and weaker competition.

Analysts at the brokerage said in a November 7 report that their new price target is set at a higher multiple on FY25E earnings. They increased the price-to-earnings ratio from 18 to 25 times FY25e earnings.

The Chennai-based automaker appears to be better competitive, especially compared to startups whose financial and policy advantages are waning.

Nomura focuses primarily on the highly competitive intensity of new startups; however, we believe that securing funding will not be easy for most of them. Additionally, many of them may have difficulty monitoring the value-added of FAME-II incentives more closely, and they will not be able to reap the benefits of PLI (about 15% of ASP).

TVS’s new product launches are well-received, while recent product launches by established companies are mostly unsuccessful. It also has a well-planned EV strategy at more attractive prices. Nomura estimates an EPS CAGR of 19% in FY23-25, and our estimate beats consensus by about 20%.

The second phase of Faster Adoption and Manufacturing of Electric Vehicles in India (FAME-II) was launched in 2019 with a spending of Rs 10,000 crore for Fasttrack EV usage.

The 50% increase in value must be done locally to enjoy the benefits of this program. Surveillance in the field has tightened, and reports suggest startups are under pressure.

The suspended subsidies are affecting the cash flow of these startups, which could put them at a serious disadvantage compared with larger players such as TVS Motors.

There has also been increased monitoring of vehicles produced under the Production Linked Incentive (PLI) program, which could again impact the startup’s bottom line, which, according to Nomura, is equivalent to 15% of the average selling price (ASP) of these vehicles for the company.

TVS Motors released health data for the September quarter. Its net profit rose 47% year-on-year to Rs 407 crore in the September quarter.