Hold Tata Motors; target of Rs 108: Prabhudas Lilladher

Prabhudas Lilladher's research report on Tata Motors

TTMT’s 1QFY21 consolidated EBITDA exceeded expectations beating JLR performance led by cost savings and better realizations. JLR margins came in at 3.5% (PLe -13%). With China stabilizing post COVID and improvement in other global markets, JLR can see gradual volume recovery. Consistent delivery on cost savings (Project charge savings of GBP4.7bn till date and target of GBP6bn by 4QFY21) and rationalized capex (-60% in S/A at Rs15bn and -40% at JLR at GBP2.5bn) should help cash flows in challenging times. However, net consolidated automotive debt increased to Rs678bn as of Jun-20 (v/s Rs482.8bn in FY20). We increase FY22/23 consol EPS by 10%/3% to factor in better JLR performance and currency gains.

Outlook

We maintain Hold with the revised SoTP based target price of Rs108 (from Rs100, roll forwarded to Sep-22), where we value JLR and S/A business at 4x EV/EBITDA each (unchanged).