Feb 16, 2017 12:51 PM IST | Source: Moneycontrol.com

Hold Tata Motors; target of Rs 501: Edelweiss

Edelweiss recommended hold rating on Tata Motors with a target price of Rs 501 in its research report dated February 14, 2017.

Hold Tata Motors; target of Rs 501: Edelweiss

Edelweiss' research report on Tata Motors

JLR’s EBIDTA, at GBP611mn (EBIDT/vehicle at GBP 4,667), was 35% below our estimate impacted by adverse product mix and higher discounting (run down of old Discovery and MY16 RR/RRS). Also, higher realised forex loss at GBP455mn (7% of sales) dragged margins. Management indicated losses are likely to stay at current levels, assuming stable GBP/USD.

Outlook

We have lowered FY17/18E EBIDTA by 35%/25% to INR295bn/385bn to reflect weaker margins. We introduce FY19E with EBIDTA of INR 428bn. We estimate 8% EPS CAGR over FY16-19 to INR48. Valuing JLR at 5.5x FY19E EV/EBIT and standalone at 8x FY19E EV/EBIDTA, we downgrade to ‘HOLD/SP’ from ‘BUY/SO with TP of INR 501. At CMP, the stock trades at PER of 14x/10x FY18E/FY19E EPS.

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