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Solid Quarter; Outlook promising

Tata Motors is a leading automobile manufacturer in India which designs, manufactures and sells commercial vehicles and passenger vehicles. Tata Motors acquired Jaguar Land Rover (JLR) in 2008.

* Consolidated revenue grew by 41.8% YoY, benefitted from higher sales volume (+89.0% YoY to ~192k units). JLR revenue grew 30.7% YoY on account of higher volumes from China and North America.

* EBITDA Margin expanded by 1060bps YoY to 14.4% due to cost efficiencies and better product mix. Adjusted PAT also rose to Rs. 5,739cr vs. Rs. 7,094cr loss in Q4FY20.

* Volume and demand is set to pick as the economy is expected to revive its Pre-COVID growth level post lockdown. Additionally, deleveraging, cash flow generation and improving margin provides support over the medium-term. Hence, we reiterate our BUY rating on the stock with a revised TP of Rs. 349 based on SOTP valuation.

Growth momentum continues

In Q4FY21, consolidated revenue increased 41.8% YoY to Rs. 88,628cr due to strong demand from both domestic and export business. Total sold volume rose 89.0% YoY to 191,720, primarily led by the domestic business (+94.0% YoY) and export business (+24.2% YoY). PV business grew 159.4% YoY with average monthly sales of all models almost doubling YoY due to strong momentum in “New Forever” portfolio and focused initiatives across value chain. Commercial Vehicle segment saw an increase of 80.5% YoY due to higher demand from infrastructure, housing, mining and e-commerce. JLR revenue grew 30.7% YoY to Rs. 66,075cr (retail sales up 11.8%YoY to ~123k units) on account of higher volumes from China and North America.

Margin expands on cost efficiencies and better product mix

Company’s consolidated EBITDA saw a massive growth of 437.0% YoY to Rs. 12,745cr with margin expansion of 10.6pps due to cost efficiencies and better volume mix. Company reported adjusted net profit of Rs. 5,739cr vs net loss of Rs. 7,094cr in Q4FY20, adjustment included asset write-down and restructuring costs recognized by JLR. JLR EBIT increased to Rs. 5,595cr vs Rs. 2,251cr loss in Q4FY20 due to strong sales in China and improved product portfolio.

Key concall highlights

* Company expects JLR volume to grow >20% and the EBIT margin ~4% for FY22E. However, negative operating performance is expected in Q1FY22 due to the ongoing pandemic.

* Also, company guided that India capex spends would be around Rs. 3,000cr3,500cr for FY22 and it spent Rs. 1,800cr in FY21 for business continuity in midst of pandemic.

* Company achieved cost savings worth Rs. 9,300cr YTD, out of the total committed target of Rs. 6,000cr.

* In FY21, PV business posted highest growth in 8 years and Nexon and Harrier witnessed their highest sales since launch.

Valuation

Company posted solid operational performance with higher demand, increase in production activities and better product mix coupled with cost efficiencies. With a robust order pipeline, the long-term outlook remains positive. Hence, we reiterate our BUY rating on the stock with a revised TP of Rs. 349 based on SOTP valuation methodology.

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