Tata Motors Ltd. share price target

2QFY21 marked initial signs of volume recovery, the benefit of mix, and costcutting initiatives coming together. This coupled with normalcy in working capital as well as tight control on capex resulted in FCF turning positive. JLR's near-term volumes may be at risk from a potential second wave of COVID. However, mix improvement and tight cost/capex control would drive sharp improvement in operating performance and debt reduction. We upgrade our FY22E EPS by 13% to factor in lower tax in JLR (reversal of deferred tax). Maintain Buy, with TP of INR230 (Sep'22 SOTP)....

Quick Research Note

We recommend a BUY on Tata Motors with a Target Price of Rs 150, an upside of ~9% from CMP of Rs. 137 and Stop Loss Rs 131.

10 September 2020 business-level FCF generation, b) the monetization of non-core assets, and c) top-up equity (if required). revenue improvement, b) cost-cutting, and c) capex control plans laid out for four key businesses (incl. Capex plans laid out for FY21 (GBP2.5b for JLR and INR15b for the India business) would not see any material change in the foreseeable future. As the monetization of non-core assets begins with the Tata Technologies and Hitachi JV (construction equipment), it would look at other assets as well. However, currently it has no plans to monetize its stake in Tata Sons. The partnership between the PV segment and JLR is not the key part of its deleveraging strategy. Demand recovery is visible across markets in the US, UK, EU, and China. Only RoW markets are yet to see recovery. JLR is seeing an additional boost from strong demand for the recently launched Evoque and Defender.

Media reports suggest that the top management of Tata Motors (TML) at its recent AGM expressed an intent to reduce automotive debt (~| 48,000 crore as of FY20) to near zero levels in the next three years. This follows the recent guidance of turning JLR, Indian operations sustainably FCF positive (from FY22E, FY21E respectively). While the intent is encouraging, we remain slightly circumspect about the deleveraging timeline, given that positive FCF from FY22E will continue to be accompanied by critical capex for new product development and new age technologies i.e. ACES. As per our...

Early signs of recovery in sales can be seen from July onwards, however the near-term performance expected to remain bleak. Maintaining a cautious outlook, we reiterate our HOLD rating on the stock with a revised target price of Rs. 119 based on SOTP valuation methodology....

and retailer shutdowns for major part of the quarter and heavily impacted the volumes. Negative operating leverage impacted the performance significantly. The auto major reported a pre tax loss of Rs 6,183.73 in Q1 June 2020 as against pre tax loss of Rs 3,238.18 crore in Q1 June 2019. Total tax expense stood at Rs 2,200.49 crore in Q1 June...

JLR's Q1FY21 negative FCF (1.2 billion) was 500 million better than previous guidance (included 1.1 billion in working capital outflows expected to reverse as production ramps up) while India negative FCF of | 4,300 crore was lower than guidance by | 700 crore. Amid ongoing focus on costs, capex, both businesses committed to turning FCF positive (JLR from FY22E in sustainable manner, standalone from FY21E) while also reducing debt levels from FY22E onwards. However, outlook on volume growth remains clouded by the evolving pandemic situation in different...

China JLR turned EBIT positive at 0.4% (post 8 quarters of EBIT loss). TTMT's 1QFY21 consolidated EBITDA exceeded expectations beating JLR performance led by cost savings and better realizations. JLR margins came in at 3.5% (PLe -13%). With China stabilizing post COVID and improvement in other global markets, JLR can see gradual volume recovery. Consistent delivery on cost savings (Project charge savings of GBP4.7bn till date and...

1 August 2020 TTMTs had its toughest quarter ever with net consol losses of INR84b as both JLR and India business were badly hurt by Covid-19 related lockdowns. (auto) FCF being negative at ~INR182b. However, it expects positive FCF in both businesses 2QFY21 onwards. Recovery in both businesses is critical for net debt reduction (INR678b, increase of INR196b QoQ). We expect losses to gradually reduce in coming quarters and turn profitable only from 4QFY21. We have lowered our FY21E loss estimates by 8% to factor in faster JLR volume recovery and cost cutting initiatives. adverse mix and higher fixed cost led to the fourth consecutive quarter of EBITDA loss (~INR7b v/s est. The beat was led by 10% YoY increase in realizations (due to higher spare contribution) and cost savings of INR5.4b. JLR Project Charge delivered total savings of GBP1.2b (cost savings of GBP0.