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We attended TTMT’s India Investor Day (refer PPT), wherein the company outlined its strategy for the domestic PV, EV and CV businesses. TTMT's PV business would continue to focus on fast-growing SUVs and premium vehicles with new launches – Curvv and Siera – and 3% margin rise over the medium term, while proactively driving EV adoption/sustaining leadership. Comments around pursuing multiple powertrain options (incl. CNG) and 25-30% EV penetration highlight continued dominance of ICE over the medium term. For the CV business, TTMT reiterated its focus on double-digit EBITDA amid moderating volume outlook from a high base. We believe the group’s play of backward integration in lithium cells is a step in the right direction towards securing supply, scale and cost competitiveness. We maintain BUY with a revised SOTP-based TP of Rs605 (vs. Rs565 earlier; chiefly on account of increased PV volume estimates).

Healthy product pipeline in PVs including EVs; ICE to continue to dominate: Four new product launches (Curvv, Sierra, Avinya and an undisclosed model) and continuous mid-cycle enhancements would drive sustained product actions till 2030. There would be 6-7 EV launches combined under Gen 2/Gen 3 (EV-first modular platform/dedicated EV platform respectively; addressing 38% of TIV); however, guidance for ‘multiple powertrains’ and 25-30% EV penetration (largely unchanged) point towards continued dominance of ICE even over the medium to longer term. Over the medium term, the company is aiming for a ~3% increase in PV margins (to double digits) on better mix, realization, cost efforts (incl. higher localization) and operating leverage; while for EVs, it aims at positive EBITDA. TTMT has planned ~USD2bn EV capex till 2027 (bulk towards platforms, products and technology).

Backward integration of cells to drive differentiation: Recently incubated Agratas Energy (under Tata Sons; ~Rs130bn initial investment for 20 GWh; target SOP in ~2 years) would perform key backward integration functions (immediate focus on cell design, production and validation) while de-risking supplies and accelerating localization – with JLR (40 GWh requirement; largely NMC) and TTMT (20 GWh requirement; largely LFP) serving as anchor customers (current supplier sourcing arrangements to continue; Agratas to eventually serve ~70% of the needs). TTMT is targeting modular production lines to control future costs/capex and has expressed confidence in withstanding global competition, given the labor and power cost advantage in India.

India CVs – Single-digit growth in FY24E: The macroeconomic environment and outlook for underlying segments remain largely positive, with fuel prices being the only potential drag; absolute industry volumes and tonnage are expected to grow in single digits this year. Pursuant to improved value proposition (e.g. via ‘varianting’ as seen in PVs), TTMT has been able to significantly reduce discounts and, thus, materially improve net pricing and profitability while sustaining its market share (in heavy trucks). It aims to further improve its retail market share and deliver strong double-digit EBITDA margin and FCF generation over the medium term, with annual capex of up to Rs25bn.

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