Buy Tata Motors Ltd For Target Rs.490 - Motilal Oswal
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JLR wholesales ahead of our estimates; Retail flat QoQ
Order book at 200k units, up 32k units from 4QFY22 levels
Wholesale volumes decline by 7% QoQ and 15% YoY
* Wholesale volumes for Jaguar-Land Rover (JLR) fell 15% YoY and 7% QoQ to 82.6k units (est. 79.4k units) in 1QFY23. Volumes (excluding Chery Jaguar Land Rover) declined by 15% YoY and 6% QoQ.
* While 1QFY23 wholesale volumes are slightly better than our estimate, the product mix seems to be much better, diluting the impact of operating deleverage. Against our EBITDA/net loss estimate of GBP513m/GBP74m, based on actual volumes, we estimate an EBITDA/net loss of GBP562m/ GBP34m.
* Accordingly, our 1QFY23 consolidated PAT estimate changes to a net loss of INR12.9b (from our earlier net loss estimate of INR17.7b).
Retail volumes flat QoQ, but down 37% YoY
* Retail sales were flat QoQ, but down 37% YoY at 78.8k units due to phaseout of RR Sport and the COVID-19 lockdowns in China.
* Retails were higher QoQ in the UK/Europe at 10%/49%, but were lower in China/North America/overseas (down 5%/30%/10%), reflecting the transition to new models and delivery times to these markets.
* Order book grew over 200k units in 1QFY23 (v/s 168k units in 4QFY22). Demand for the new Range Rover/new Range Rover Sport/Defender remains strong, with orders for over 62k/20k/46k units. JLR expects sales to improve over 9MFY23, with the easing of semiconductor shortages.
* Valuation and view: All three businesses of TTMT are in recovery mode. While the India CV business will see a cyclical recovery, the India PV business is in a structural recovery mode. JLR is also witnessing a cyclical recovery, supported by a favorable product mix. However, supply-side issues will defer the recovery process. While there will be no near-term catalysts from the JLR business, the India business (~50% of SoTP) will see a continued recovery. The stock trades at 16.3x FY24E consolidated EPS and 2.8x P/B. We maintain our Buy rating, with a TP of INR490 (Mar’24 SoTPbased).
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