Accumulate Tata Motors; target of Rs 1254: Prabhudas Lilladher

Prabhudas Lilladher's research report on Tata Motors

TTMT’s consolidated revenue for Q1FY25 increased by 5.7% YoY, in line with PLe/BBGe, led by robust performance in its JLR & CV business units, while PV business reported a de-growth owing to decline in volumes. EBITDA margin expanded by 110bps YoY to 14.4% against PLe/BBGe of 15%/13.9%. JLR EBIT margin grew by 30bps YoY to 8.9%, with company retaining its guidance of delivering ≥8.5% EBIT margin and improving its net debt in FY25. TTMT noted that the demand slowdown in EV business was due to decline in buying from fleet operators. However, its top 2 models continue to perform well and the new launch (Curvv) should aid in volume expansion. Additionally, it remains optimistic on growth prospects of CV business owing to infrastructure improvement and industrial capex. We maintain our positive view on TTMT as 1) JLR business is likely to deliver sustainable growth, 2) CV business is likely to report healthy performance due to replacement and demand in higher tonnage vehicles, 3) cost reduction and mix improvement are expected to expand profitability, and 4) demerger and listing could lead to sustained growth for respective businesses and benefit shareholders.

Outlook

Factoring this, we estimate its revenue/EBITDA to grow at a CAGR of 11.6/20% over FY24-26E. We retain “Accumulate” with SoTPbased target price of Rs1,254 (previous Rs1,089).