Tata Motors - Getting JLR-ised; Domestic business humbled in the interim - Networth Capital

Tata Motors (TAMO), India's foremost automotive maker hardly needs any introduction. It is India's largest automotive company having brands range from luxury saloon & sports car Jaguar and all terrain vehicle Lands Rover to mass market names like Nano and Indica. JLR now contributes over 90% of the company's earnings and has a global presence with manufacturing facilities in the UK and China. Domestically, Tata Motors is the biggest commercial vehicle manufacturers and the third-largest manufacturer of cars and utility vehicles. Post acquisition of JLR, TAMO has been able to mitigate, to major extent, the cyclical risk associated with the CV business. The Company's focus on introducing newer models under JLR portfolio globally and LCV ramp up domestically to cater to the growing demand remains the key driver so far. Our estimation is based on the assumption of a steady growth in JLR portfolio and tepid domestic economic growth. The PV segment is expected to better its market share from next year, albeit at slow pace, under mounting competitive environment. However, full blown growth would only be visible once the domestic economic condition improves. We have arrived at the valuation of TAMO through SOTP valuation methodology, taking the domestic, international and subsidiaries working into account, and set 1-year price of Rs364 which leaves 27% appreciation potential from the current level. We recommend Buy on the stock. Also, we recommend buy on TAMODVR with a 1-year price objective of Rs200, yielding an appreciation of 38% from the extant level.

Source : Equity Bulls

Keywords