Buy Tata Motors; target of Rs 263: FinQuest Securities

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Buy Tata Motors; target of Rs 263: FinQuest Securities

FinQuest Securities is bullish on Tata Motors and has recommended buy rating on the stock with a target of Rs 263 in its January 20, 2012 research report.

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FinQuest Securities is bullish on Tata Motors and has recommended buy rating on the stock with a target of Rs 263 in its January 20, 2012 research report.

"Jaguar Land Rover (JLR) & Tata Motors Limited's (TML) domestic passenger vehicle volumes outpacing our estimates, Target price achieved, revised upwards to Rs 263 (upside of 20% from CMP of Rs 219)- We had factored in a spurt in volumes from Land Rover (LR) post the launch of Evoque in Sept'11. Evoque has been such a huge success that it has exceeded our expectations and has been the driving force behind the stellar growth in LR volumes (up 42% Y-o-Y to 71,050 units in Q3FY12).What's more surprising is even Jaguar which had been a laggard on the volume growth front has started to pitch in (up 16% Y-o-Y to 15,272 units in Q3FY12).

"On the domestic business front, TML is starting to benefit from the shift in buying pattern of the Indian populace from a predominantly petrol driven passenger car market to a diesel driven one. TML has started to benefit after continuous price hikes of petrol post the petrol deregulation by the Government (June '10) with volumes starting to witness an upswing for TML from Nov'11 onwards. The chief reasons for this growth is the predominant diesel portfolio of TML in passenger cars, "Tata" name synonymous with diesel cars, most fuel efficient passenger cars tag in the diesel car segment and the lack of diesel cars from Maruti Suzuki India limited(MSIL) in the mini segment. Additionally, we believe the interest rate tightening cycle to reverse in the near term on the back of lower inflation expectations which would aid in volume growth of MHCVs/cars."

"To make things more rosy, JLR has a considerable tailwind from a favorable currency movement in almost every single currency (USD~GBP, EUR~GBP & INR~GBP) it is exposed to, the benefits of the same to be accrued in Q3FY12. INR depreciation against the GBP results in strong translation gains (when translating JLR's GBP profits back to INR). Even operationally, currency has been favorable for JLR over the last couple of quarters (the benefit of which normally comes with a one quarter lag) - the USD has appreciated against the GBP [all JLR sales outside Europe (~50% of volumes) are USD denominated] and the EUR has depreciated against the GBP (~45% of components/materials purchased are EUR denominated, which would off-set the negative impact of the ~25% of revenues that are EUR denominated). Apart from the currency benefit, the fact that the fastest growing market (China) is also the most profitable bodes well for future margins. Buy Tata Motors with a target of Rs 263," says FinQuest Securities research report.

Non-Institutions holding more than 90% in Indian cos

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