Buy TATA Motors Ltd For Target Rs. 740 - Motilal Oswal Financial Services
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JLR 2QFY24 wholesales at 96.8k units (est. 92.5k units)
2Q FCF guidance at around GBP300m
Wholesale volumes grew 29% YoY and 4% QoQ
* JLR’s wholesale volumes (ex-China JV) grew 29% YoY/4% QoQ to 96.8k units (est. 92.5k units). 1HFY24 wholesales grew 29% YoY to 190.1k units.
* A breakup between Jaguar and LR wholesale was not shared in the press release. Higher-than-expected wholesales despite an annual two-week summer shutdown indicate that supply-side constraints continue to ease.
Retail volumes (incl. China JV) up 21% YoY/35% QoQ
* 2Q retails grew 21% YoY (+35% QoQ) to 106.6k units, while 1HFY24 retails increased by 25% to 208.5k units. Retails were higher in all the markets, with strong growth witnessed in the rest of world (+56% YoY), North America (+32% YoY), China (+7% YoY), UK (+9% YoY) and EU (+16% YoY).
* The order book declined by 17k units QoQ to 168k units in 2QFY24 (vs. 1Q order book of 185k units) due to increased order fulfilment. RR/RR Sport/ Defender account for 77% of the order book.
Others
* FCF is indicated to be over GBP300m in 2Q. In the 1Q call, the management had guided for 2Q FCF to be slightly lower than 1Q FCF of GBP451m. ? Based on the beat on 2Q wholesales volumes for JLR, we increase our 2QFY24 revenue/EBITDA/PAT estimates for JLR to GBP7.2b/GBP1.1b/GBP287m (from GBP6.9b/GBP1b/ GBP236m earlier). We also raise our 2QFY24 estimates for consolidated revenue/EBITDA/PAT to INR1,077.5b/INR137.1b/INR33.4b (from INR1044.7b/INR130.2b/INR28.9b earlier).
* Valuation and view: TTMT’s all three businesses are in a recovery mode. The India CV business is expected to see a cyclical recovery, while the India PV business is in a structural recovery mode. JLR is also seeing a cyclical recovery, supported by a favorable product mix. However, supply-side issues may delay the recovery process. While there will be no near-term catalysts from the JLR business, the India business (~50% of SoTP) will continue to see a recovery. The stock trades at 15x/14.4x FY24E/FY25E consolidated EPS, and 4.6x/4.1x FY24E/FY25E consolidated EV/EBITDA. We maintain our BUY rating on the stock with a TP of INR740 (based on Sep’25 SOTP).
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