Tata Motors Ltd. share price target

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).

JLR's wholesale volumes grew 3.8% YoY and 1.5% MoM in December 2017 to 55,066 units (including China JV's 10,269 units). Jaguar volumes grew 6% YoY to 16,826 units against our estimate of 12,000 units due to lower XE sales. Land Rover (LR) volumes increased 2.8% YoY to 38,240 units against our estimate of 54,750 units, led by ramp-up of all-new Discovery and RR Velar. For 3QFY18, JLR wholesales grew 4.5% YoY to 159,067 units, led by 12.4% YoY growth in Land Rover sales while Jaguar sales fell 12.5% YoY to 42.4k units. JLR's retail volumes increased marginally by 0.6% YoY and 6.4% MoM to 55,697units. The 4.1% YoY increase in LR volumes was partially offset by 7.8% YoY decline in Jaguar volumes.

Tata Motors' (TML) Q2FY18 results came in above estimates. Consolidated revenues came in at | 70156 crore (up 6.5% YoY, 19.9% QoQ), above our estimate of | 68487 crore. Reported consolidated EBITDA margins were at 13.9% (our estimate: 12.9%) against 10.7% in Q2FY17. The company reported a consolidated PAT of | 2501.7 crore (our estimate: | 2322.3 crore) against | 848.2 crore in Q2FY17 and | 3199.9 crore in Q1FY18 JLR revenues of 6.3 bn (up 6.2% YoY, 6.3% QoQ), came in above...

JLR's EBITDA margin at 11.8% surprised, as hedging losses eased to GBP 337 mn (vs. GBP 453 mn QoQ) offsetting launch cost of Velar in the quarter. Going forward, total hedging losses (assuming currency is stable) are expected to be lower at ~ GBP 1.1 bn (~GBP 800 mn within 1 year) vs. GBP 2.5 bn Y..

Tata Motors Ltd Q2FY18 results comment Revenue grew by 20.85% to Rs. 70690.65 Cr in Q2FY18 when compared to the previous quarter. Also, it increased by 11.26% when compared with Q2FY17.

We maintain BUY with a revised SOTP-based TP of Rs 530 Tata Motors (TTMT) 2QFY18 EBIDTA at Rs 97bn (+38% YoY, +68% QoQ) beat estimates, owing to a recovery in JLRs margin. JLR reported net revenue of GBP 6.3bn (+12% YoY), while EBIDTA margins came in higher at 11.8% (+150bps YoY, +390bps QoQ), led by a reduction in hedging losses (GBP 343mn vs GBP454 in 1Q) and a richer model mix. Losses from the standalone business also reduced to Rs 2.7bn vs Rs 6.1bn in 2QFY18, led by strong growth in CVs and PVs.

few months and we expect it to continue to do so hereon as macros are improving and also a growth in the company's PV business over the next two years. Margins elevate on Fx hedge losses reduction at JLR and cost control in Indian business EBITDA margin at JLR came in at ~12% in Q2, which was significantly higher than the previous quarter. This was on the back of reduction of forex hedge book losses by over GBP 100 mn qoq. This was due to a favorable GBP-USD movement and unwinding of the hedges taken earlier. Total outstanding value of the hedge losses came down at GBP1.09 bn from GBP2.4 bn yoy. This was a significant reduction out of which ~GBP700 mn will mature in the coming one...