Tata Motors Truly global; Raise target to Rs1,420 􀂄 BofA Merrill Lynch

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Tata Motors
Truly global; Raise PO
􀂄 Reasonable visibility for growth
Tweak EPS forecasts to factor increased volume forecasts for JLR, being partially
offset by cut in volume/margin assumptions of standalone operations. Postrevision,
we are 1%-4% above consensus over next 2 years. Our positive stance
continues to be due to solid demand in global luxury car market, negating
domestic headwinds.
JLR to sustain momentum
Raise profit forecasts by 1%-11% over FY12-13, driven by revised volume
estimates following strong inquiries for Land Rover Evoque. Our yearly
assumptions now stand at 270K and 299K units respectively. We moderate
margin assumptions by 10bps in FY12E, mainly factoring adverse currency
movements, being partially offset by operating leverage and improving sales mix.
Standalone growth will be restricted
We expect margins, and therefore profitability to be restricted due to (1) deceleration
in demand for commercial vehicles, and (2) cross subsidization to increase sale of
passenger vehicles. We still forecast 17% profit CAGR over next 2 years.
PO raised
PO been raised by 4% both for ordinary shares as well as Tata DVRs. While we
maintain rating on ordinary shares, we believe that Class A shares or DVRs is
relatively a better investment option as it trades at an unjustifiable 45% discount
for the same economic interest.