Buy Tata Motors; target of Rs 378: Prabhudas Lilladher

Prabhudas Lilladher's research report on Tata Motors

Tata motors continuing from its domestic investor day, hosted its first ever investor day for JLR at its Castle Bromwich facility in the UK. With the management outlying its medium to long term strategy for the business. The recent slowdown in volumes and overall unfavourable market conditions over the last few years have resulted in an increased focus on cost reduction measures and cut back in investments, with the management maintaining its near term EBIT guidance of 4-7%. The management aims to outperform the overall industry growth and will launch four new models over FY19-23. We maintain our "BUY" recommendation though being cautious on the JLR numbers as the main markets are seeing challenges. We have not made any changes to our FY20 earnings forecasts as our numbers are already built in for the challenges.

Outlook

We currently factor in ~7% volume growth for the JLR over FY19-20 and maintain "BUY" with the target price of Rs378, where we value JLR at 2.75x Mar'20E EV/EBITDA and Standalone entity at 10x Mar'20 EPS.