Buy Tata Motors; target of Rs 375: Emkay Global Financial

Emkay Global Financial's report on Tata Motors

In Q4FY21, wholesale volume improvement is expected at 10-15% qoq despite the impact of lockdown (38% showrooms are now partially or fully closed). For the next five years, the outlook for SUVs (Land Rover models) and Electric vehicles (new target segments of Land Rover and Jaguar) is stronger. Management expects market share gains for models such as RR and Velar across regions. In next 12-18 months, new RR, RR Sport and Defender would be launched. Our current estimates factor in 14% volume CAGR for FY21-23E.

Outlook

We reaffirm Buy on TTMT with a TP of Rs375 (Rs355 earlier), based on an EV/EBITDA of 2x/11x on JLR/standalone estimates on FY23E and the value of other subsidiaries/investments at Rs68/share. We have assigned a value of Rs13/share for the China JV due to the anticipated turnaround, based on an EV/EBITDA multiple of 4x, resulting in an increase in our TP. Key downside risks: Luxury car demand contraction in target markets, failure of new launches, and adverse currency/commodity prices.

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