Tata Motors Ltd. share price target

31 May 2018 Automobiles We assess liquidation value at ~INR256/share or ~10% downside from current level. This is after considering the intangible assets of JLR and India business at 35% of book value (based on 35% capitalization rate v/s JLRs 80%). While stocks have traded below their liquidation values in the past, barring any global macro events, we do not see TTMT sustaining at such levels for a long time. At ~INR256/share, TTMT would be valued at ~0.9x FY18 P/B, which is close to its floor P/B valuation of 0.9x in the last 10 years. Interestingly, even during the Global Financial Crisis (GFC) and worst financials ever for JLR (EBIT margin of -6.5% in FY09), similar health of India financials (EBITDA margins at 6.7% in FY09) and negative CFO, the bottom valuation for TTMT was at 0.9x in 3QFY09. Coincidentally, JLRs peers BMW (0.98x) and Daimler's (0.76x) bottom valuations are also around ~0.87x P/B (ex GFC).

The fall in bottom line was primarily due to a Rs 1,641.38 crore impairment of capital work in progress. The company registered drop in margins during the quarter. Operating profit margin on a consolidated basis for the quarter endedMar 18 fell 210 bps to 11.9% (vis a vis 14%).The drop inmargin was due to rise in other and raw material expenses (net of sales, stock adjusted). Raw material cost increased by 130 bps to 56.5%. Other expenses rose 210 bps to 21.9%. Employee cost was steady at 9.35%. Purchase of products for...

Tata Motors' (TML) Q4FY18 consolidated revenues were at | 91279 crore (up 18.2% YoY, 23.1% QoQ), vs. our estimate of | 76654 crore. The beat on consolidated revenue is mainly after JLR revenues came in at 7.6 bn vs. estimate of 6.0 bn. JLR wholesale volumes were at 182757 units (up 4.4% YoY) against our estimate of 155,005 units Consolidated EBITDA margins were at 13.1% (our estimate: 11.1%) down 226 bps YoY, up 30 bps QoQ. Reported EBITDA margin of JLR for Q4FY18 was at 12.2%, above our estimate of 12.6%. However,...

Q4FY18 consolidated numbers posted 18.2% yoy growth at the topline as both JLR volumes grew at a good pace. EBITDA grew at 1% and PAT adjusted for one-offs grew by 1% at 26 bn. At the standalone level, revenues jumped by 46% yoy on strong volume growth of 38% and realization growth of 8% yoy. However, margins came at just 6.9%(down 200 bps qoq) as higher input costs, higher operating expenses and unfavorable product mix led to margin reduction. Bottomline at this business adjusted for one offs came in at a profit of 5.5 bn against loss yoy. At JLR, 2.3% increase in wholesales volumes (Ex Cherry JV) came in on strong China volumes which got offset by weak UK, US and Europe volumes. Realizations were up by...

We believe that the Management's clear thrust on key 6 verticals with more emphasis on cash flow would result in strong balance sheet, going forward. Exit from unwanted business and curtailing investment indicates TTMT's focus on core business. We believe that this strategic decision would transform TTMT's business across segment over next 2 years. Further, the recent correction in stock price provides an opportunity to own good business, as the risk reward seems to be favourable. We assign BUY recommendation on the stock with an SOTPbased Target Price of Rs375 (valuing standalone business at Rs137; JLR at Rs345 and other...

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...