Buy Tata Motors; target of Rs 521: YES Securities

YES Securities is bullish on Tata Motors has recommended buy rating on the stock with a target price of Rs 521 in its research report date July 27, 2022.

Broker Research

July 29, 2022 / 10:05 PM IST

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

live

bselive
nselive

Volume

Todays L/H

YES Securities' research report on Tata Motors

TTMT’s 1QFY23 results missed our/street estimates led by 1) JLR ‐ inferior product/market mix as supply constraints led to slower than expected ramp‐up in RR/RR sports ramp up, 2) JLR – unfavorable fx and 3) S/A – higher op. expense. While net auto debt increased to Rs607b in 1QFY23 (v/s Rs487b) led by WC change, the same will be normalized with production normalization in 2QFY23. Some of these variables to improve in near‐term as 2QFY23 to see dual impact of easing chip shortages benefitting production with China market opening up. However, several internals continue to remain healthy with VME spends declined to ~1.4% (v/s 3.1% YoY), JLR order book at 200k units (v/s 168k in 4Q with ~65% of orders are for high margin new launches such as Defender, RR and RR sport). Despite underperformance in 1QFY23, JLR’s guidance of positive EBIT (5%) and positive FCF (GBP1b) is unchanged. We like TTMT given it’s improving India franchise, early leadership in EVs in India, and JLR’s aggressive cost controls. Standalone business is in sweet spot led by healthy cyclical recovery both in PV and CV whereas favorable product cycle to help drive JLR outperformance.

Outlook

We cut FY23/24 EPS by ~14.5%/0.5% to factor in RM inflation and negative fx movement and estimate revenue/EBITDA CAGR of 14%/29% in FY22‐24E. We maintain BUY with TP of Rs521 (v/s Rs515 earlier).