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Jun 25, 2012, 11.40 AM IST | Source: Moneycontrol.com

Buy Tata Motors; target of Rs 279: Firstcall Research

Firstcall Research is bullish on Tata Motors and has recommended buy rating on the stock with a target of Rs 279 in its June 22, 2012 research report.

Firstcall Research is bullish on Tata Motors and has recommended buy rating on the stock with a target of Rs 279 in its June 22, 2012 research report.

“Tata Motors Limited is India's largest automobile company; it is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer. Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of India. Over 4 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company's manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat power trains. The company is establishing a new plant at Sanand (Gujarat). The company's dealership, sales, services and spare parts network comprises over 3500 touch points; Tata Motors also distributes and markets Fiat branded cars in India.”

“Tata Motors is also expanding its international footprint, established through exports since 1961. The company's commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. It has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia, Senegal and South Africa. With over 3,000 engineers and scientists, the company's Engineering Research Centre, established in 1966, has enabled pioneering technologies and products. The company today has R&D centres in Pune, Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car. Within two years of launch, Tata Indica became India's largest selling car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, India's first indigenously developed mini-truck.”

“During the quarter the company disclosed a consolidated profit after tax of Rs. 62340.00 million for the quarter ended March 31, 2012 as against of Rs.26375.20 million in the same quarter last year, an increase of 136.36%. It has reported Net sales are increased by 44.27% to Rs. 509079.00 million for the quarter ended March 31, 2012 as against Rs 352870.60 million in the same quarter last year. Total income grew by 44.14% to Rs 510664.80 million from Rs.354275.20 million in the same quarter last year. Company EPS is stood at Rs.19.64 for the quarter ended March 2012.”

“At the current market price of Rs 247, the stock is trading at 4.55 x FY13E and 3.82 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.54.33 and Rs.64.65 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 23% and 31% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 2.83 x for FY13E and 2.46 x for FY14E. Price to Book Value of the stock is expected to be at 1.56 x and 1.10 x respectively for FY13E and FY14E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 279 for medium to long term investment,” says Firstcall Research report.

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