Tata Motors - Strong performance continues - HDFC Securities

Mr Aditya Makharia, Institutional Research Analyst, HDFC Securities

Tata Motors continues to report an improvement in its operational performance as EBITDA margin for the standalone entity expanded 130bps QoQ to 8.7% and the JLR margin sustained above 15%. However, the results were impacted by a write-off of GBP 1.48bn at JLR, related to a mark down of earlier project related investments. The luxury OEM continues to report improved cash flows, with a positive FCF of GBP 729mn in 4Q; the net automotive debt stands reduced to INR 409bn vs. INR 482bn YoY. We are increasing our SOTP-based FY23 target price to INR 380 to factor in the improved performance.

4QFY21 financials: (1) Standalone: Revenue grew 37% QoQ to INR 200bn, led by 21% growth in volumes and 13% in realisations (owing to higher share from MHCV at 23% vs 18% QoQ). EBITDA margin at 8.7% surprised positively (+125bps QoQ), despite 230bps QoQ increase in the RM costs. After several quarters of having reported a loss, Tata posted an adj. profit of INR 3bn. (2) JLR: Revenue grew 9% QoQ to GBP 6.5bn- while volumes were up 20%; realisations dropped 9% due to seasonality (lower mix from China in 4Q). EBITDA margin came in at a healthy 15.3%, driven by Charge+ initiatives. The division reported an exceptional loss of GBP 1.5bn due to asset write-downs/restructuring cost. (3) Consolidated: Revenue/EBITDA grew 17/15% while Adj. PAT came in at INR 38.4bn (+41% QoQ).

Key highlights: (1) JLR leading the show: Driven by a global recovery and launch of new models, the management expects sales to grow in healthy double digits in FY22E. The OEM has been able to lower its breakeven point to 400k units (vs 600k earlier) due to its restructuring initiatives. JLR is reducing its product platform to 3 from 6 as it prepares for an EV led transition. Charge+ program comes to an end after delivering GBP 2.1bn savings in FY21 and 6bn in its lifetime. The Defender is reaching 6k-7k units/month and has an order book of 20k+ units (worth ~3 months of sales).

(2) Increase in India CV market share: Tata Motors' market share in CVs has improved 350bps over the quarter to 42.4%. CV recovery is led by MHCV and ICV. Segment EBITDA expanded 110bps QoQ to 9.1%. (3) Strong PV portfolio: PV revenue is up 160% YoY as the company has gained market share in this segment (8.2% vs 4.8% in FY20). The segment has reported the highest-ever EBITDA margin of 4.9%, driven by an improved product portfolio, which includes Electric Vehicles.

Shares of TATA MOTORS LTD. was last trading in BSE at Rs.314.5 as compared to the previous close of Rs. 332.35. The total number of shares traded during the day was 5237832 in over 54704 trades.

The stock hit an intraday high of Rs. 322.95 and intraday low of 312.15. The net turnover during the day was Rs. 1657063455.

Source : Equity Bulls

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