Buy Tata Motors (DVR): Bonanza

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Buy Tata Motors (DVR): Bonanza

Bonanza is bullish on Tata Motors (DVR) and has recommended buy rating on the stock in its January 8, 2011 research report.

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Bonanza is bullish on Tata Motors (DVR) and has recommended buy rating on the stock in its January 8, 2011 research report.

"Tata Motors is India's largest automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand, Spain and Italy. Jaguar Land Rover (JLR) is the most important subsidiary. It also has an industrial joint venture with Fiat in India. The Tata Motors DVR shares carry 1/10th of voting rights and shareholders are entitled to a 5% higher dividend than ordinary shares in lieu of surrendering voting rights."

"The performance has been improving over the last few quarters. JLR continues to show strong profitability and reported EBITDA margins of 16.6% in Q2FY11.JLR business has generated net positive cash flow (after providing for capex) in Q2FY2011. JLR has reduced short term debt by about 240 million GBP. TML standalone has sold 67441 vehicles in Dec 10, a growth of 31% YoY and 23% MoM with exports registering a growth of 68% YoY and 38% MoM. TML along with its subsidiaries has significant presence in Asia, Europe and North America. TML has issued through QIP DVR in Oct10 at Rs 764 and Ordinary shares at Rs 1074. TML DVR is available at an attractive multiple of 4.69 (Basic) and 5.4 at fully diluted EPS.(based on reported Q2FY11 earnings(X) The DVR is available at a discount of 38 % vis a vis ordinary shares which is expected to reduce."

"Inflation & slow development of road infrastructure could impact the demand in the domestic market European sovereign debt issue can impact sales adversely. The company is dealing in multiple currencies. The currency fluctuations can impact the profits and valuation. The reduction of discount may take time."

"The long term investors can buy the TMLDVR in view of attractive valuation. The long term holders of ordinary shares of TML can switch to TMLDVR," says Bonanza Research Report.

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To read the full report click on the attachment