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Published on 9/10/2018 10:42:56 AM | Source: Motilal Oswal Securities Ltd

Buy Tata Motors Ltd For Target Rs.335.00 - Motilal Oswal

Posted in Broking Firm Views - Long Term Report| #Tata Motors Ltd. #Auto Sector #Broking Firm Views Report #Motilal Oswal

JLR announces two-week shutdown at Solihull

Residual growth of ~4% in 2HFY19 at risk as China demand normalization takes longer time

*  JLR announced two-week shutdown at Solihull plant to align supply to reflect fluctuating demand globally. This is further to three day week from Oct-18 to Dec-18 at Castle Bromwich plant.

*  While Solihull manufactures RR, RR Sport, Velar, Discovery and F-Pace, Castle Bromwich makes Jaguar XE, XF, XJ and F-Type.

*  It attributed slower production plans to weakening global demand, especially in China, and weakness in diesel sales.

*  JLR said employees would be paid for the duration of the shutdown and no jobs would be lost.

*  This announcement came on back of 12% YoY decline in Sep-18 retails for JLR (~4% decline in 1HFY19), impacted by 46% decline in China retails and ~7% decline in US retails.

*  UK (-1%) and EU (-5%) witnessed substantial pressure on volumes post WLTP norms implementation from Sep-18.

*  Jaguar volumes grew 4%, driven by new models like XE & I-Pace as other models declined substantially. LR volumes declined ~16% YoY, as strong growth in Velar (+26%) was more than diluted by decline across other models.

*  As per JLR, Industry retails in UK declined ~20.5% and in Germany declined ~31% primarily relating to the timing of new WLTP homologation rules as well as reduced diesel demand. Industry retails in US declined by ~5.5%.

*  We see rising risk to our JLR FY19 estimated volume decline of ~4%, which implies residual growth of ~4% in 2HFY19. We had recently cut our EPS estimates for TTMT by 35%/13% driven by cut in JLR's volumes by 6%/4.5% and JLR's EBITDA by 11%/6%, respectively. The stock trades at 10.5x/6.1x FY19/20 consol. EPS and ~0.71x/0.63x P/BV. Maintain Buy.

 

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