Prabhudas Lilladher recommended hold rating on Tata Motors with a target price of Rs 146 in its research report dated October 28, 2020.
Prabhudas Lilladher's research report on Tata Motors
TTMT’s 2QFY21 results were a mixed set with JLR margins at 11.1% (PLe 9%, -230bp YoY) while S/A margins at 2.9% (PLe 5%). JLR is seeing better volume recovery post Covid in key markets like UK and China with retail sales improving to 113.6k units in 2Q (v/s 74.1k units in 1Q). However, key overhang such as no deal Brexit, increasing covid cases in European markets and emission compliance norms continue to persist. Any favorable outcome from Brexit (with deal) will be key rating catalyst. The net consolidated automotive debt stands at Rs615bn as of Sep-20 (v/s Rs483bn in FY20). We increase FY22/23 consol EPS by 8.6%/4.7% to factor in better JLR performance and currency gains.
We maintain Hold with a revised SoTP based target price of Rs146 (from Rs138, Sep-22), where we value JLR and S/A business at 3.5x and 11x EV/EBITDA respectively.
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