Buy on Tata Motors; see volume growth of 17%: Centrum

“If you see, despite the challenging environment, EBITDA margins have come at 14.5% for JLR,” he said.

On the back of this, he has upgraded his call on the stock to a buy, with a target of Rs 320 levels. “We currently have got a target price of Rs 294, but we will relook our numbers and our target price,” he said.

For the year, Centrum expects Tata Motors to post a 17% growth in volumes, boosted by new product launches in their Jaguar and Land Rover portfolio.

Below is an edited transcript of his interview with Sonia Shenoy and Ekta Batra.

Q: What is your initial take on how Tata Motors’ numbers and how do you approach the stock now?

A: I would take it in two parts. The standalone business results were slightly better than what we were expecting. Even the JLR numbers look much better than what the street was expecting. So if you see, despite the challenging environment, EBITDA margins have come at 14.5% for JLR.

Going forward, what I would be keen on hearing from the management is the pipeline in terms of the new product launches, because the company is planning to launch new products both in the Jaguar and Land Rover portfolio over the next three to four months.

Secondly, if I look at the BMW numbers, there was some sort of slowdown seen in the Chinese market. The July numbers were more or less equivalent to the numbers in June. So I think their growth expectations in terms of the developing and the emerging market is something which I would be looking forward for.

Q: How exactly would you be placed on the Tata Motors stock at this point in time, any sort of target prices?

A: We had actually downgraded it to hold when it was around Rs 300 levels. Now, if you see, there is been a significant correction in the stock. At this level, we upgraded it to Rs 320 and continue to maintain a buy rating on the stock.

Q: What is your overall volume estimate for FY13 for JLR, have you scaled that down?

A: We continue to maintain our volume estimates for JLR. I am looking at close to 3.67 lakh units, which would mean a growth of 17%. We are modeling 100,000 units as the sales of Evoque, which is a new product launch and something which is doing extremely well for JLR.

In terms of stock, we currently have got a target price of Rs 294 and we would relook our numbers and our target price. But we continue to maintain our buy rating on the stock.