Buy Tata Motors; target of Rs 378: Prabhudas Lilladher

Prabhudas Lilladher's research report on Tata Motors

Tata Motors' Q4FY18 performance was below our expectations with consolidated adjusted profit at Rs30.9bn, lower 29% YoY but up ~179% QoQ (below PLe: Rs45bn). Consolidated revenues grew a decent 18.2% YoY to Rs912.8bn (in-line with PLe) while operating margins too met expectations at 13.1%, lower 220bps YoY, up 30bps QoQ. However, significantly higher depreciation provision (up 39% YoY) as well as tax rate led to PAT miss (adjusting for forex gains / impairment losses).

Outlook

Management's focus on improving the performance of the standalone entity is now clearly visible and we expect the same to continue. Given the attractive valuations and buoyant management guidance, we upgrade to "Buy" (earlier Accumulate) with a target price of Rs378, where we value JLR at 2.75x Mar'20E EV/EBITDA and Standalone entity at 10x Mar'20 EPS.