Hold Tata Motors; target of Rs 145: ICICI Direct

ICICI Direct recommended hold rating on Tata Motors with a target price of Rs 145 in its research report dated February 11, 2019.

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February 19, 2019 / 15:46 IST

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ICICI Direct's research report on Tata Motors

Tata Motors (TML) reported a disappointing Q3FY19 performance At JLR, sensing the current muted demand prospects and profitability challenges, the company undertook a one-time impairment charge to the tune of Rs 27,838 crore On a standalone basis, net revenues came in at Rs 16,208 crore (up 0.7% YoY), with volumes at 171,354 units, down 0.5% YoY. EBITDA was at Rs 1,430 crore with corresponding EBITDA margins at 8.8%. Consequent PAT was at Rs 618 crore JLR wholesale sales volume were at 1.41 lakh units, down 11.0% YoY, amid continued adverse market conditions in China. Consequent net sales were at £6.2 billion, down 1.0% YoY. EBITDA margins were at 7.3%. JLR reported loss at PAT level amounting to £3.1 billion. It includes one-time impairment charge of £3.1 billion Consolidated net sales were at Rs 77,001 crore, up 3.8% YoY with EBITDA margins of 9.3%, down 154 bps QoQ. Consequent to the large write-off, TML reported an after-tax loss to the tune of Rs 26,961 crore at the consolidated level.

Outlook

Going forward, challenging times may persist for TML and we would await the commentary of global OEM as well as closely watch Brexit developments before any meaningful upgrade in our estimates. We value TML on SOTP basis with domestic operations contributing Rs 108 (6x EV/EBITDA), JLR contributing Rs 13/share (2.2x EV/EBITDA) and others at Rs 24. We arrive at a target price of Rs 145 and maintain our HOLD rating.

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