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A challenger emerges
CHANGE
Initiate at BUY with 20% upside potential
Tata Motor’s sales and profitability have increased nearly five-fold since
its acquisition of Jaguar Land Rover (JLR) in 2008. High-brand equity and
the planned near doubling of investment commitment in JLR to GBP1.5b
per year over the next five years should help Tata Motors sustain doubledigit
volume growth as well as earnings growth over FY12-14E.
CATALYST
Innovation and margins to support growth momentum
The company plans to launch over 40 models/variants in the next five
years, which we believe will help diversify growth momentum that is
currently largely dependent on the Range Rover Evoque model. EBITDA
margins should also remain above average (16-17%) to FY14, supported
by new launches, high volume growth and better capacity utilisation.
VALUATION
SoTP-based TP of INR360.00, with JLR valued at 3x EV/EBIDTA
Although Tata Motors shares have rallied sharply YTD in line with other
cyclical stocks, we anticipate further re-rating on improving free cash
flow and return on capital. Our 3x target FY14E adjusted EV/EBITDA for
the JLR business is at a premium to peers in the luxury-car segment to
reflect the prospects of market-share gains and higher earnings growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A challenger emerges
CHANGE
Initiate at BUY with 20% upside potential
Tata Motor’s sales and profitability have increased nearly five-fold since
its acquisition of Jaguar Land Rover (JLR) in 2008. High-brand equity and
the planned near doubling of investment commitment in JLR to GBP1.5b
per year over the next five years should help Tata Motors sustain doubledigit
volume growth as well as earnings growth over FY12-14E.
CATALYST
Innovation and margins to support growth momentum
The company plans to launch over 40 models/variants in the next five
years, which we believe will help diversify growth momentum that is
currently largely dependent on the Range Rover Evoque model. EBITDA
margins should also remain above average (16-17%) to FY14, supported
by new launches, high volume growth and better capacity utilisation.
VALUATION
SoTP-based TP of INR360.00, with JLR valued at 3x EV/EBIDTA
Although Tata Motors shares have rallied sharply YTD in line with other
cyclical stocks, we anticipate further re-rating on improving free cash
flow and return on capital. Our 3x target FY14E adjusted EV/EBITDA for
the JLR business is at a premium to peers in the luxury-car segment to
reflect the prospects of market-share gains and higher earnings growth.
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