Tata Motors Ltd. share price target

Forex victimizes JLR, cut down estimates and rating Abysmal quarter with a double whammy coming from both JLR and domestic business Q3FY17 was a quarter when TaMo was subjected to too many moving parts altogether...

ICICI Securities Ltd | Retail Equity Research Tata Motors' (TML) Q2FY17 results were below our estimates. Consolidated revenues came in at | 65900 crore (up 7% YoY), below our estimates of | 66717 crore. JLR's revenues came in at 5953 mn (up 23% YoY, 9% QoQ), almost in line with our estimate of 5959 mn. JLR's wholesale volumes were at 139235 units (including China JV), up 19.3% YoY. Standalone came at | 10,322.5 crore (up 3.5% YoY, flat QoQ), against our estimates of | 10,965 crore. The miss on...

Operating Margin to See Sharp Expansion on weak GBP Impacted by unfavourable foreign currency hedges, new customer acquisition programme in JLR business and decline in M&HCV; volumes, Tata Motors (TML) has reported muted performance in 2QFY17. The Company's consolidated EBITDA margin declined by 110bps yoy to 9.5%. Though we continue to believe that adverse forex would continue to impact TML's performance in the near-term due to its old hedge book, continued weakness in GBP would augur well for JLR's performance on unwinding in its hedges, as JLR generates 80% of its revenue via overseas sales....

Tata Motors 2QFY17 performance was below our expectations due to crack in margins for both JLR as well as the domestic business. Adjusted for one-offs, adverse Fx on payables/hedges and one time provision for new customer quality programs, JLR?s EBITDA margin stood at 12.9% vs exp of 14.4%.

The recent launches of Bolt, Zest and Tiago have led to a good market share win for the company. The management expects prebuying in MHCV segment before the countrywide adoption of BS IV from the next fiscal. The company would launch new versions of Prima LX and hopes to regain the maket share. Similarly the company would launch new versions of Ultra range in the LCV segment and launch of Hexa,Kite 5 and Nexon would propel the passenger car growth in the coming months....

Tata Motors (TTMT) delivered disappointing Q2FY17 performance with deterioration across all the parameters in both the business, primarily due to forex loss on its hedging contracts. Its consolidated Revenues/EBIDTA/PAT grew 7.1%/-3.6%/-10.2% YoY but fell 0.0%/17.6%/56.6% QoQ to Rs 659bn/Rs63bn/Rs82bn (our estimate of Rs 674bn/Rs95bn/Rs31bn) in the quarter. Consolidated EBIDTA margin declined by 106bps YoY and 203 bps QoQ to 9.5%, impacted by poor standalone performance and negative forex impact at JLR.

Weak set of numbers as Brexit continues to impact, maintain BUY on long term Disappointing quarter as JLR margins get hurt on unfavorable hedges In Q2FY17, consolidated numbers posted a 6.7% yoy topline growth while at the bottomline there was a profit of 8.48 bn v/s loss of 17.4 bn in Q2 FY16. However, on...

JLR Sep-16 wholesale volumes grew ~3.6% YoY (+25% MoM) to 52,914 units (estimate: 52,000 units), driven by F-Pace and XE. Jaguar volumes grew ~97% YoY to 16,211 units (estimate: 14,000 units), driven...

JLR Aug-16 wholesale volumes grew ~28% YoY (-3.8% MoM) to 42,260 units (estimate: 43,500 units), driven by F-Pace and XE. Jaguar volumes grew ~98% YoY to 13,038 units (estimate: 13,500 units), driven XE and F-Pace. However, volumes of other Jaguar models continued to moderate. Land Rover (LR) volumes grew ~10% YoY to 29,222 units (estimate: 30,000 units), driven mainly by growth in Freelander and Discovery Sports. JLR Aug-16 retail volumes grew ~26% YoY (-17% MoM) to 36,926 units, driven by 104% growth in retail volumes of Jaguar and 9% growth for LR. Jaguar retail volume growth was driven by recently launched F-Pace (at ~4.5k units) and XE (+50% YoY).

The stock trades at 13.3x/10.4x FY17/FY18E consolidated EPS. We raise our FY17E/18E EPS estimates by 8%/3%. We also increase our EV/EBITDA multiple for JLR to 4.5x (v/s 4x previously) to factor in a) stronger Cherry JV performance and b) favorable GBP not reflecting in FY18 estimates due to hedges. Maintain Buy with a TP of INR647 (FY18 SOTP-based) for ordinary shares and INR452 for DVR (~30% discount to TP for ordinary shares).

Tata Motors’ (TML) Q1FY17 results were below our estimates. Consolidated revenues were at | 65,895 crore (up 9.1% YoY), below our estimate of | 70,245 crore. JLR revenues came in at £5461 million (mn) (up 9% YoY), came in lower than our estimate of £5815 mn mainly on account of lower than estimated volumes. JLR wholesale volumes were at 134,334 units (up 17.4%YoY) vs. our estimate of 143,094 units. Standalone revenues were at | 10,320 crore (up 11% YoY) vs. our estimate of | 10,375 crore. The marginal miss on estimates was on account of lower than estimated ASP

Consolidated EBITDA margins at 12.9% (vs. our estimate of 14.8%) were impacted by JLR’s performance. JLR’s reported EBITDA margin for Q1FY17 was at 12.3% (down 410 bps YoY, 390 bps QoQ). However there was an adverse forex impact of £207 million, including revaluation of £84 million, mainly euro payables resulting from depreciation in pound following Brexit vote. EBITDA margins excluding FX revaluation were at 14%.Standalone margins at 6.7% (up 195 bps YoY) were marginally above our estimates of 6.6% . Consequently, consolidated PAT came in at | 2260 crore (vs. estimate of | 3120 crore). JLR reported PAT of £304 mn vs. our estimate of £444 mn. The miss on PAT was mainly attributable to lower than estimated revenues & adverse impact of forex loss of £207 million. Chery JV share of PAT at £45m (vs. estimate at ~£60 mn vs. £49 mn in Q4FY16 vs. £6 mn loss in Q1FY16. Arrive at a target price of | 660 with BUY rating.