Buy Tata Motors; target of Rs 480: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct’s research report on Tata MotorsTata Motors’ (TML) Q2FY16 results were above our estimates. Consolidated revenues were at Rs. 61,318 crore (up 1.2% YoY, 0.5% QoQ), above our estimate of Rs. 58,616 crore. Net revenue of JLR was at £4831 million (up 0.5% YoY, down 3.4% QoQ) vs. our estimate of £4440 million on account of higher than estimated volumes. (JLR wholesale: 111,160 units vs. our estimate 101,799 units). Consolidated EBITDA margins were at 12.6% (down 443 bps YoY, 349 bps QoQ) vs. our estimate of 11.8%. Reported EBITDA margins of JLR were at 12.2% (down 721 bps YoY, 421 bps QoQ) vs. our estimate of 14.3% mainly due to less favourable sales mix, higher manufacturing & launch cost and unfavourable forex revaluation. Post adjustment of forex revaluation, actual margins would be 13%.The standalone business reported a margin of 6.8% vs. our estimate of 5.3% mainly due to strong MHCV growth of 35.3% YoY & ongoing cost reduction & other margin improvement initiatives. The company reported a loss of Rs. 429.8 crore on account of an exceptional item of £245 million (write-down of inventory value related to Tianjin port explosion). Post adjustment for extraordinary items, adjusted PAT came in at Rs. 2,223 crore, above our estimate of Rs. 1254 crore. While JLR reported a net loss of £92 million (on account of exceptional item), standalone loss came in at Rs. 287.5 crore against our estimated profit of Rs. 23.6 croreOutlook and valuationTata Motors’ business has been increasingly polarised towards the global business of JLR as weakness in Indian domestic demand has led to a drag in the performance of the standalone business. We believe that with JLR’s strong product line-up and planned product refreshes, the market share march is likely to continue. We remain positive on sustained earnings growth for the JLR business as the product pipeline grows and market share increases across geographies. We value the stock on an SOTP basis, with JLR on 3.5x EV/EBIDTA basis contributing ~Rs. 388/share while the domestic business contributes Rs. 50/share. Inclusive of other subsidiaries and the China JV, we arrive at a target price of Rs. 480.For all recommendations, click here 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

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