Buy Tata Motors; target of Rs 500: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Tata Motors

Tata Motors’ (TML) Q2FY18 results came in above estimates. Consolidated revenues came in at Rs 70156 crore (up 6.5% YoY, 19.9% QoQ), above our estimate of Rs 68487 crore. Reported consolidated EBITDA margins were at 13.9% (our estimate: 12.9%) against 10.7% in Q2FY17. The company reported a consolidated PAT of Rs 2501.7 crore (our estimate: Rs 2322.3 crore) against Rs 848.2 crore in Q2FY17 and Rs 3199.9 crore in Q1FY18 JLR revenues of £6.3 bn (up 6.2% YoY, 6.3% QoQ), came in above our estimates of £6.2 bn. The beat is attributable to JLR wholesale volumes, which were at 153210 units (up 10% YoY, 10.6% QoQ) against our estimates 149593 units. Growth in volumes was on account of 32.5% YoY increase in China volumes, which were significantly driven by JV volumes in China, up ~45% YoY. Reported consolidated EBITDA margins were at 13.9% against our estimate of 12.9%. Reported EBITDA margin of JLR for Q2FY18 came in at 11.8%, marginally below our estimate of 11.9%. While the JLR gross margins were in line with our estimates, other expense to sales was lower on account of lower warranty expense that offset the adverse effect of higher incentives in developed markets Consequently, JLR reported PAT of £308 million (mn) was marginally above our estimate of £300 mn In standalone operations, net revenues came in at Rs 13400 crore (up 29.8% YoY, 13.5% QoQ), against our estimate of Rs 13453 crore. The miss on the estimates was on account of lower than estimated ASP. Reported EBITDA margin was at 6.7% (up 306 bps YoY, 658 bps QoQ) against our estimate of 3.8%. Consequently, the standalone loss was at Rs 295 crore against our estimated loss of Rs 551.5 crore.

Outlook
We value the stock on an SOTP basis, with JLR (ex-China JV) at 3x EV/EBITDA basis contributing ~Rs 385/share while the domestic business contributes Rs 43/share. Inclusive of other subsidiaries, we arrive at a target price of Rs 500.
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