Buy Tata Motors; target of Rs 400: Motilal Oswal

Motilal Oswal's research report on Tata Motors

JLR’s retails grew 68% YoY to ~124.5k in 1QFY22, with LR/Jaguar growing 72.5%/55%. Wholesales stood at 84,442 units (excluding China JV), up 72.6% YoY. However, this was ~30,000 units lower (~27%) than what otherwise would have been planned as a result of semiconductor supply constraints and the impact of COVID-19, although this reduction had been broadly anticipated. Based on recent inputs from suppliers, the chip supply shortages in 2Q are expected to be greater than that in 1QFY22, potentially resulting in ~50% lower wholesale volumes than planned. It expects the situation to start to improve in 2HFY22. Hence, it expects a negative FCF of ~GBP1b, with a negative EBIT margin in 2QFY22.

Outlook

The stock trades at 9.2x FY23E consolidated EPS and 1.7x P/B. We maintain our Buy rating with a TP of INR400/share (Mar’23E SoTP-based).

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