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Buy Tata Motors; target of Rs 355: Angel Broking

Angel Broking is bullish on Tata Motors has recommended buy rating on the stock with a target of Rs 355, in its August 08, 2013 report.

August 19, 2013 / 18:35 IST
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Angel Broking is bullish on Tata Motors has recommended buy rating on the stock with a target of Rs 355, in its August 08, 2013 report.

Angel Broking report on Tata Motors: Another strong performance by JLR: Tata Motors (TTMT) reported an in-line operating performance for 1QFY2014 with Jaguar and Land Rover (JLR) once again registering a robust performance. JLR witnessed a strong margin expansion of 200bp yoy to 16.5% on the back of superior product and geography mix, favorable currency impact and also due to softening of the commodity prices. Nonetheless, the adjusted bottom-line at Rs 1,905cr was significantly lower than our estimate of Rs 2,683cr, owing to increase in interest (up 17.9% yoy) and depreciation expense (up 49.9% yoy) and also due to significantly higher tax-rate (39.8% as against 27.3% in 1QFY2013). The standalone performance continued its dismal run as volume and margin pressures persisted, resulting in an adjusted bottom-line (adjusted for dividend income from JLR) loss of over Rs 400cr, higher than our expectations of a loss of Rs 270cr. The consolidated top-line registered a healthy growth of 8% yoy to Rs 46,785cr, in-line with our estimates of Rs 46,989cr, driven by a strong top-line growth of 13.3% yoy at JLR (INR terms). The JLR performance was led by a healthy volume and net average realization growth of 8.6% yoy and 4.4% yoy respectively. The JLR volume growth was primarily driven by Jaguar models (up 57.8% yoy) on the back of new launches (F-type and AWD and smaller engine options for XF and XJ and XF Sportbrake). Land Rover sales however, remained flat yoy and were impacted mainly due to the phasing out of the old Range Rover Sport ahead of the introduction of the new Range Rover Sport. The standalone top-line posted a significant decline of 14% yoy following an 18.9% yoy decline in volumes. Outlook and valuation: We expect headwinds in the standalone business to continue in FY2014 due to weak macro-economic environment which is expected to continue impacting domestic volumes. Nevertheless, we expect JLR to sustain its strong performance driven by continued momentum in the global luxury vehicle market and aided further by the strong product launch pipeline and the success of the model launched in 4QFY2013. We expect JLR volumes to grow at ~13% CAGR during FY2013-15E and PAT to grow at ~15% CAGR during the same period. We retain our positive view and Buy rating on the stock with an SOTP based target price of Rs 355. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
first published: Aug 19, 2013 06:35 pm

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