Tata Motors Ltd. share price target

23 May 2018 Consol revenues grew 18% YoY to INR913b. EBITDA grew 1% YoY to INR109b (est INR125b). Adj PAT fell 34% YoY to INR28.7b (est INR45.4b). Better product mix and QoQ decline in incentives led realization growth of 3.6% QoQ. Adj. for impairment expense, EBITDA margins declined 110bp YoY (+270bp QoQ) to 13.5% (est 14.2%). However, higher tax rate resulted in adj.

JLR's wholesale volumes grew 8% YoY (declined 40.6% MoM) to 45.3k units(including China JV's 7.7k units) in April 2018. Jaguar volumes grew 18% YoY to 14.9k units, beating our estimate of13k units. Land Rover volumes were 30.4k units, lower than our estimate of 32k units. JLR's retail volumes grew 11.9% YoY (declined 46% MoM) to 45.2k units, as Jaguar retails grew 8% YoY (declined 45.3% MoM) to 13.3k units while LR retails increased 13.6% YoY (declined 46.3% MoM) to 31.2k units.

JLR's wholesale volumes grew 6.4% YoY (+ 33.9% MoM) to 76.2k units(including China JV's 7,126 units) in March 2018. Jaguar volumes increased 2.7% YoY to 21.04k units (est. of 21.2k units), while Land Rover (LR) volumes rose 7.9% YoY to 55.2k units (est. of 55.9k units). For FY18, JLR wholesales grew 5.4 % YoY to 633.5k units, as LR sales rose 8.3%to 457.3k units, while Jaguar sales declined 1.4% to 176.2k units. JLR's retail volumes declined 7.8% YoY (- 109.8% MoM) to 83.7k units in March2018. LR sales fell 5.7% YoY to 59.4k units, while Jaguar sales were down by 12.7% YoY to 24.3k units.

LR's wholesale volumes grew 4.3% YoY (+14.7% MoM) to 56.9k units (including China JV's 5,197 units) in Feb-18, as against our estimate of 62k units. Jaguar volumes in the month increased marginally by 0.9% YoY to 16,245 units (est. of 17k units). Land Rover (LR) volumes rose 5.7% YoY to 40.7k units (est. of 45k units). For YTDFY18, JLR wholesales grew 5.3% YoY to 557.3k units, led by an 8.4% increase in LR sales to 402k units, partly offset by a 1.9% decline in Jaguar sales to 155k units. JLR's retail volumes declined 2.6% YoY (-18.7% MoM) to 39.9k units. LR sales fell 1.5% YoY to 28k units, while Jaguar sales declined 5.2% YoY to 11.6k units.

The multi-fold growth in profits was due to low base in year-ago quarter. Profit for the year-ago period stood at Rs 111.6 crore. During the quarter, standalone volumes increased 29% yoy and 11.6% qoq to 1,71,000 units...

JLR's wholesale volumes grew 1.8% YoY (-9.9% MoM) to 49.6k units (including China JV's 8,125 units) in January 2018, as against our estimate of 55.6k units. In Jan-18, Jaguar volumes grew 4.4% YoY to 16,108 units (est. of 14,000 units). Land Rover (LR) volumes increased marginally by 0.6% YoY to 33.5k units (est. of 41.6k units), led by ramp-up of all-new Discovery and RR Velar. For YTDFY18, JLR wholesales grew 5.4% YoY to 500k units, as LR sales increased 8.7% to 361k units, while Jaguar sales declined 2.2% to 139k units. JLR's retail volumes rose 2.9% YoY (-11.9% MoM) to 49.1k units. LR sales grew by 3.7% YoY to 35k units and Jaguar sales by 0.8% YoY to 14.1k units.

JLRs EBITDA margin at 10.9% was below estimates on higher Variable Marketing Expenditure (VME) at 6.9% (due to RR/RR Sport phase-out), offsetting lower hedging losses (at GBP 304 mn vs. 337/455 mn QoQ/YoY).

US and Europe volumes. JLR EBITDA margins came down at 9% from 11.8% qoq and remained flattish yoy. This was due to weak volumes in the geographies mentioned above, higher investments in new launches, phasing out of Discovery and forex losses (1.26 bn). Net profits...

We roll forward our TP to FY20. Our revised SOTP-based TP is Rs 473 (JLR at 3x EV/EBITDA and standalone at 6x EV/EBITDA) vs 530 earlier. Tata Motors (TTMT) 3QFY18 consolidated revenue (Rs 741.5bn, 16% YoY) and EBIDTA at Rs 95bn (+34% YoY) were in line with estimates. APAT at Rs 12.14bn was impacted by higher depreciation (+32% YoY), product development cost (+13% YoY), lower profit from JVs/associates and higher effective tax (owing to deferred tax charge of Rs 5.9bn).

Consol. revenue grew 16% YoY to INR741.6b. EBITDA rose 37% YoY toINR85.4b (est. of INR94.6b). Higher tax further dragged adj. PAT toINR11.4b (est. of INR26.7b; 2QFY18: INR24.4b; 3QFY17: INR2.2b loss). JLR - unfavorable mix, high incentives dent EBITDA: Net sales at GBP6.3b(in-line) grew 4.3% YoY. Weaker product mix due to RR/RR Sports run-down and higher incentives led to ~2% QoQ decline in realizations. As a result, EBITDA margin shrunk 90bp QoQ (+80bp YoY) to 10.9% (est. of12.4%). Further lower share of China JV PAT, higher depreciation and tax restricted adj. PAT to GBP89m (est. of GBP294m; -20% YoY, - 71% QoQ). S/A- Better mix, price hike and cost reduction propel turnaround:Revenues grew 58% YoY (+16% QoQ) to INR161b (est. of INR156b) , led by volume/realization growth of 29%/22% YoY. EBITDA margin came in at8.6% (est. of 8%), up 720bp YoY (+160bp QoQ), driven by better mix, cost-reduction initiatives and operating leverage. As a result, S/A turned PAT positive (at INR1.9b v/s est. of INR1.3b).