Automobiles September 10, 2014 Tata Motors Bloomberg: TTMT IN Reuters: TAMO.BO BUY Institutional Equities India Research COMPANY UPDATE Recommendation CMP: Rs517 Target Price: Rs655 Previous Target Price Rs560 Upside (%) 27% Stock Information Market Cap. (Rs bn / US$ mn) 1,578/26,001 52-week High/Low (Rs) 532/320 3m ADV (Rs mn /US$ mn) 2,960/48.8 Beta 1.1 Sensex/ Nifty 27,265/8,153 Share outstanding (mn) 2,694 Stock Performance (%) 1M 3M 12M YTD Absolute 19.5 15.3 62.7 37.4 Rel. to Sensex 11.0 8.2 15.0 6.7 Performance Source: Bloomberg Earning Revision (%) FY15E FY16E Revenue 0.0 3.7 EBITDA 0.7 8.6 EPS 1.0 6.9 Source: Karvy Institutional Research Analysts Contact Mitul Shah +91 22 6184 4312 [email protected]200 300 400 500 600 15,500 17,500 19,500 21,500 23,500 25,500 27,500 29,500 Sep-13 Oct-13 Nov-13 Jan-14 Feb-14 Mar-14 May-14 Jun-14 Jul-14 Sep-14 Sensex (LHS) Tata Motors (RHS) Ready to Race…New Launches at JLR to Drive Profitability; M&HCVs - All Set for Next Bull Run Tata Motors’s (TTMT) is expected to witness strong traction across the business with new launches from JLR and domestic MHCV bottoming out. JLR unveiled its small Jag namely Jaguar XE range at London with an indicative price of £27,000. This is the lightest and stiffest Jaguar saloon made up with light weight aluminum structure and having better fuel efficiency. Moreover, its pricing is competitive to take on competition with value added features. It would compete with BMW 3 series, Audi A4 and Merc-C Class. Company plans its commercial launch around beginning of 2015. This would be the first vehicle to have Ingenium engine, indigenously developed by JLR at its UK factory. Company is projecting XE as performance car, being most fuel efficient Jaguar car ever produced. We expect new XE to help improve market shares in small luxury saloon segment and would also drive overall volumes of Jaguar family. It’s the first volume product from Jaguar. It may clock monthly volumes of ~4,000 units and may further surprise on volumes. We believe that price cut in Chinese market would bring healthy volumes for JLR, while tax benefit from its local assembly plant in China would be more than enough to compensate the impact of price cut in FY16. We believe that TTMT’s profitable business growth at JLR justifies its high capex. Domestic Business to Revive Strongly: Tata Motors has begun witnessing volume improvement in PV as well as CV segment recently. Its newly launched Zest has received good initial response, while M&HCV segment reported a YoY growth for the first time in Aug’14 in last 2.5 years. During past CV cycle, industry declined 20% in down cycle and bounced back with ~35% growth. In current cycle, MHCVs declined at CAGR of 25% over FY12- FY14, which is steeper than previous cycle, indicates much stronger bounce back in new up cycle. However, Due to shift in higher tonnage, we expect lower growth of 20% for the industry. M&HCV volumes remained stable over past few months citing bottoming out phase, ahead of strong revival. We expect margin improvement in standalone operations, backed by CV up-cycle. We increase our SOTP based target price from Rs 560 to 655 per share, valuing TTMT’s standalone business at Rs. 100, JLR at Rs. 566 and other subsidiaries at Rs. 38 based on FY16E EBITDA, post excluding net debt of Rs. 50 per share. We reiterate our “BUY” on Tata Motors. Key Financials (Consolidated) Y/E Mar (Rs. mn) FY12 FY13 FY14 FY15E FY16E Net Sales 1,635,934 1,860,376 2,301,025 2,940,877 3,275,052 EBITDA 202,502 217,673 321,065 437,498 526,747 EBITDA margin (%) 12.4 11.7 14.0 14.9 16.1 Adj. Net Profit 143,505 103,286 147,276 191,735 220,981 EPS(Rs.) 43.2 32.1 45.8 59.5 68.6 RoE (%) 53.6 28.5 28.0 25.5 23.2 RoCE (%) 28.4 17.1 18.1 17.2 16.9 PER (x) 12.0 16.1 11.3 8.7 7.5 EV/ EBITDA 9.1 8.6 6.0 4.5 3.8 Source: Company, Karvy Institutional Research
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Automobiles September 10, 2014
Tata Motors
Bloomberg: TTMT IN Reuters: TAMO.BO
BUY
Institutional Equities
India Research
COMPANY UPDATE
Recommendation
CMP: Rs517
Target Price: Rs655
Previous Target Price Rs560
Upside (%) 27%
Stock Information Market Cap. (Rs bn / US$ mn) 1,578/26,001
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