Tata Motors Ltd. share price target

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).

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..