Tata Motors Final

TATA MOTORSTATA MOTORS

Amisha ChaudharyAmisha Chaudhary

David RusirareDavid Rusirare

RecommendationRecommendation

BUY : Target Price 31.55BUY : Target Price 31.55

Drivers: Growth in India, Investment in Drivers: Growth in India, Investment in Technology, Market Leader, Successful Technology, Market Leader, Successful Acquisition of Jaguar and Land RoverAcquisition of Jaguar and Land Rover

Trading at 22.29, Trading at 22.29,

September 2September 2ndnd @ 1 PM @ 1 PM

Company OverviewCompany Overview

Tata Motors produces Automobiles in the following Tata Motors produces Automobiles in the following segments: segments:

Sales by Segment

Light Commercial Vehicles

24%

Medium and Heavy Commercial

Vehicles21%

Passenger Cars31%

Utility Vehicles24%

Sales by RegionSales by Region

Geographic Distribution by Sales

India38%

United States8%

United Kingdom23%

Rest of Europe13%

Rest of the World18%

Macro Overview: IndiaMacro Overview: India

Forecast for 2010 GDP growth rate raised Forecast for 2010 GDP growth rate raised from 8.8% in April to to 9.4% (IMF).from 8.8% in April to to 9.4% (IMF).

Inflation predicted to fall between 6-6.9% Inflation predicted to fall between 6-6.9% by March 2011 from 10.55 (July) by March 2011 from 10.55 (July)

Currency: forecasted to depreciate, Currency: forecasted to depreciate, Exports will become cheaperExports will become cheaper

More on MacroMore on Macro

Exports: UAE 12.87%, US 12.59%, China Exports: UAE 12.87%, US 12.59%, China 5.59% (2009)5.59% (2009)

Private domestic consumption accounts Private domestic consumption accounts for 57% of GDP in India compared with for 57% of GDP in India compared with only 35% in China.only 35% in China.

External Debt: 18% of GPD, US 94% of External Debt: 18% of GPD, US 94% of GDPGDP

Composition of GDPComposition of GDP

industry, 28.20%

agriculture, 17%

services, 54.90%

Auto IndustryAuto Industry

India is 7India is 7thth Largest Producer in the world Auto Largest Producer in the world Auto Market Market

Competition comes from Indian manufacturers as well as from international car companies: Nissan, Honda, Toyota, Ford.

We expect foreign manufacturers to increase their penetration of the Indian market following the easing of certain import restrictions

Industry SnapshotIndustry Snapshot

Domestically: MHCVs have grown the fastest, In Exports its LCVs and Overall its MCHVs

Small Cars: TataSmall Cars: Tata

Large Car DivisionLarge Car Division

The CompanyThe CompanyTata’s Market Share Position: Tata’s Market Share Position:

Market Share          

  Small Cars Domestic Big Cars Domestic UV LCV MHCVs

TATA 12.6 22.3 13.3 56 59.9

Maruti Suzuki 52.2 31 n/a n/a n/a

Hyundai Motor 21.3 10.1 n/a n/a n/a

Others 13.9 24.6 8.3 15.5 4.8

Honda n/a 12 n/a n/a n/a

Toyota Kirloskar n/a n/a 21.7 n/a n/a

Mahindra & Mahindra n/a n/a 50.2 28.5 n/a

General Motors n/a n/a 6.4 n/a n/a

Ashok Leyland n/a n/a n/a n/a 26.3

Eicher Motors n/a n/a n/a n/a 8.9

TATA InternationalTATA International

Acquisition of Land Rover and Jaguar Acquisition of Land Rover and Jaguar 2008: 31% and 26% increased in Sales 2008: 31% and 26% increased in Sales (July) (July)

Tata exports to the Middle East, Africa, Tata exports to the Middle East, Africa, and Europe. Tata has dealerships in 26 and Europe. Tata has dealerships in 26 countries across 4 continents countries across 4 continents

Electric Car to launch in Europe by 2012Electric Car to launch in Europe by 2012

ComparablesComparablesFY10 FY11

Tata Motors 4.2 3.6Toyota Motors 11.7 9.6Changan Automobile 12.7 10.2Dongfeng Motor 6.4 5.8FAW Car Co. 8.6 6.9Tianjin Faw 11.2 8.9BYD 13.5 11.3SAIC 10.5 7.8Anhui Jianghuai 7.9 6.4Geely 7.2 6.0Brilliance 22.1 19.0Great Wall Motor Co. 7.7 6.6CNHTC Jinan Truck Co. 11.4 11.7China Motor Corp. 9.4 8.9Maruti Suzuki India 9.4 8.3Hyundai Motor 6.6 6.0

Mean 10.41 8.89SE 1.03 0.90 95 % CI MAX 12.43 10.66 95 % CI MIN 8.39 7.12

EV/EBITDA

ComparablesComparables

Global CompetitorsGlobal Competitors

DCF Base CaseDCF Base Case

Scenario AnalysisScenario Analysis

Base Case: Tata is able to sustain growth around 27% in Base Case: Tata is able to sustain growth around 27% in current economic conditions. current economic conditions.

Upside: Economy recovers, Tata shows strong growthUpside: Economy recovers, Tata shows strong growth

Downside: Economy goes into deeper recession, TATA is Downside: Economy goes into deeper recession, TATA is unable to sustain growth. unable to sustain growth.

Investment RiskInvestment Risk

Currency Devaluation of the Rupee, since Currency Devaluation of the Rupee, since TATA has significant foreign denominated TATA has significant foreign denominated debt.debt.

Rising competitionRising competition

Cyclical BusinessCyclical Business

Sustainability of JLRSustainability of JLR

Increasing Costs of Raw Materials and Increasing Costs of Raw Materials and RegulationsRegulations

Stock VolatilityStock Volatility

In the NewsIn the News

September 1, 2010 India: Tata Motors' sales rise 32% in AugustSeptember 1, 2010 India: Tata Motors' sales rise 32% in August

October 12, 2010, S &P upgrades Tata Corporate credit rating to October 12, 2010, S &P upgrades Tata Corporate credit rating to BB- (BB- (citing its improved capital structure after a recent share citing its improved capital structure after a recent share issue of USD750m) .issue of USD750m) .

The Aria, first crossover vehicle in India launched October 25The Aria, first crossover vehicle in India launched October 25 thth (Meets European safety standards).(Meets European safety standards).

http://www.automotiveworld.com/news/oems-and-markets/83574-india-tata-motors-http://www.automotiveworld.com/news/oems-and-markets/83574-india-tata-motors-sales-rise-32-in-augustsales-rise-32-in-august

SourcesSourcesTATA Annual Report Form 20-F

TATA Conference Call August 2010

Bloomberg

S&P Report

IDFC Securities Industry Report

Business Line, Yahoo News, IMF, Time, Reserve Bank of India

http://www.time.com/time/world/article/0,8599,1957281,00.html http://forecasts.org/exchange-rate/india-rupee-exchange-rate.htm