Accumulate Tata Motors; target Rs 360: P Lilladher
Prabhudas Lilladher is bullish on Tata Motors and has recommended accumulate rating on the stock with a target price of Rs 360 in its March 05, 2013 research report.
March 06, 2013 / 12:24 IST
Prabhudas Lilladher is bullish on Tata Motors and has recommended accumulate rating on the stock with a target price of Rs 360 in its March 05, 2013 research report.
"Tata Motors, JLR is likely to witness a 12.2% CAGR in volumes for FY13-FY15E led by the all-new platform and new product launches over the next three years across various segments. The new launches at JLR, including the all-aluminium bodied 'Range Rover', have generated huge positive response from the customers. At the same time, the All-Wheel Drive (AWD) option in Jaguar products and Station wagon XF would widen the addressable market in US and Europe, respectively. With volume improvement on account of new launches and favourable product mix as well as geographical mix (China to account for 24% of Land Rover volumes in FY15E), we expect margins at JLR to improve from 14.5% in FY13E to 15.6% in FY15E. At the same time, standalone business is likely to witness a recovery in FY15E, mainly on account of 25% YoY growth in M&HCV volumes. Tata Motors' ROE of 27% is superior to its peers' average ROE of ~14% and valuation at 7.9x FY15E adj. EPS is at a discount, which in our view, is attractive. We roll over our valuation to FY15E and upgrade the stock to 'BUY' with an SOTP-based target price of Rs 360.JLR recently launched the all-aluminium bodied new 'Range Rover' which has generated a huge response. This is the first major platform change for the product in 10 years. Given the fact that there was no platform change over the last decade, there could be a pent-up demand for the new 'Range Rover' and the upcoming product launches on the new platform. In addition to the new Range Rover, JLR is likely to start the wholesale sales of the new 'Range Rover Sport' by June’13. These two products, coupled with stable volumes for 'Evoque', are likely to lead to a 12.6% CAGR in volumes for Land Rover for FY12-FY15E period.We value JLR at 3.5x FY15E EV/EBITDA multiple at Rs296/share. We value standalone business at Rs 42/share, whereas, we value the other subsidiaries at Rs22/share. The stock is currently trading at 7.6x FY14E EPS and 6.3x FY15E EPS. However, adjusting for R&D expense, the valuation stands at 9.3x FY14E and 7.9x FY15E. This is at a discount to global peers’ average P/E of 8-9.0x FY15E earnings. On account of ~24.1% potential upside from the current levels, we upgrade the stock to buy from accumulate earlier," says Prabhudas Lilladher research report.Non-Institutions holding more than 90% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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