ICICI Direct recommended hold rating on Tata Motors with a target price of Rs 160 in its research report dated July 26, 2019.
ICICI Direct's research report on Tata Motors
Tata Motors (TML) reported weak results in Q1FY20. While consolidated revenues were down 8.4% YoY to Rs 61,467 crore (JLR down 2.8% YoY, standalone down 19.9% YoY), the margin performance was more disappointing. Consolidated margins of 6.2% were at a multi-year low, dragged by negative operating leverage and higher marketing and warranty costs in JLR. Consequent consolidated loss at the PAT level was at Rs 3,680 crore (JLR loss at £402 million). JLR reported negative FCF of £719 million.
Using SOTP valuation technique we value TML at Rs 160 i.e. 8x EV/EBITDA (FY21E) to TML standalone business (~15% premium to its competition) and 3x EV/EBITDA (FY21E) to JLR. We retain our HOLD rating on the stock.
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