Tata Motors’ December quarter results came in better than Street expectations. What analysts liked the most was Jaguar Land Rover (JLR) orderbook that stood tall at 2,15,000 units and also the fact that new order-bookings in December quarter were higher than retails. They also liked an improvement in net pricing in commercial vehicle (CV) division and said further improvement is likely in March quarter. What they did not like was uncertainty on supply chain.
A gradual ramp-up is expected in JLR production ahead though, Emkay Global said while suggesting a target of Rs 515 for Tata Motors from Rs 485 earlier. Nomura India finds the stock worth Rs 508 while Jefferies sees the stock at Rs 565.
Nomura India said JLR may benefit from rising chip supply; India CV strategy to reduce discounts working well.
“We roll forward our valuation to March 2024 (Dec-23F earlier). We value JLR at 1.2 times EV/Ebitda, CV at 10 times EV/Ebitda, PV at 1.3 times EV/Sales and investments at Rs 85 per share. The stock is trading at 4.3 times FY24F Ebitda. Rising JLR production and debt reduction would be important catalysts, in our view,” it said.
The brokerage estimated net debt for Tata Motors to reduce to Rs 23,000 crore, or Rs 60 per share by FY25-end from Rs 57,500 crore or Rs 150 per share currently.
Tata Motors reported a consolidated net profit of Rs 3,043 crore for the quarter against a loss of Rs 1451 crore in the same quarter last year. Total income jumped to Rs 88,489 crore from Rs 72,229 crore YoY. Jaguar Land Rover revenues came in at 6 billion pounds, up 28 per cent.
The third quarter results have compensated for a 28 per cent earnings miss in September quarter, said Nuvama Institutional Equities. Nuvama said the last four quarters were precarious for JLR due to semiconductor uncertainty, model changeovers of RR and RRS, and China lockdown.
As these issues are getting addressed, Nuvama said tailwinds from the new RR and RRS along with strong demand for Defender filtering into the P&L should compensate for disappointment. “The strong product cycle tailwind in JLR keeps our hopes alive. In India, MHCV would recover strongly in FY23, but watch out for the fallout of the recent adverse macro events,” it said while suggesting a target of Rs 502 on the stock.
Motilal Oswal Securities said Tata Motors’ Q3 operating performance was a beat, driven by strong mix benefits for JLR and lower discounts in the India CV business.
“JLR is seeing strong demand for RR/RRS/Defender (74 per cent of order book), which augurs well for FY24 performance as supply has gradually improved. India CV should continue to benefit from good demand and focus on the demand-pull strategy,” it said.
This brokerage has upgraded its consolidated EPS estimates for FY23 (reduction in losses) and FY24 (by 19 per cent) to account for a strong mix at JLR and better margin in the India CV business due to lower discounts while suggesting a target of Rs 525 on the stock.
Also read: SGX Nifty up 71 points: Asian markets, dollar movement, Q3 earnings, FPI flows & more
Also read: Adani group debt: Here’s total exposure of PSU banks, private lenders in top 5 Adani firms
