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Prabhudas Lilladher Bullish On This Multibagger Tata Group Stock, Maintains Buy For 26% Returns
Prabhudas Lilladher in its report maintains a "buy" call on Tata Motors Limited with a target price of Rs 520 per share. According to the given target price, the brokerage claims a potential upside of up to 26%. Tata Motors is a large-cap homegrown Auto sector Company of Tata Group. It has a market cap of Rs 1,37,413 crore.
Stock Outlook & Returns
The current market price of Tata Motors is Rs 412.80 per share on NSE. Trading 4.70% down from its previous close. It recorded its 52-week low on 17 November 2021 at Rs 536.70 and its 52-week high was recorded on 12 May 2022 at Rs 366.20, respectively.
In terms of returns on investment, the stock has mixed returns over the past 5 years. In the past 1 month, it has given 4.24% negative return, whereas, in 3 months, it has given 13.21% negative return. It has given 19.19% negative returns over a year, whereas, in 3 years, the stock has given a multibagger return of 144.16%. In the past 5 years, it has given 2.32% negative returns on investme
2QFY23 financials:
- Standalone: Revenue at Rs 149.5bn was flat QoQ, in line with our estimates. CV volumes were flat 100.5k units, however, ASPs improved 1%. EBITDA margin came in at 5.7%, flat QoQ led by higher RM cost (77.2% of sales vs 75.7% sequentially).
- JLR: Volumes grew 5% QoQ to 75.3k units. However, improved product mix led to a 14% increase in realization (GBP 69.8k). EBITDAM surprised at 10.3% (+400bps QoQ).
- Consolidated: Revenue at Rs 796bn grew 11% QoQ vs Ple: Rs 762bn. EBITDA margin came at 11% and expanded 280bps QoQ led by operating leverage. Company reported adj. loss of Rs 12.5bn.
Key takeaways
- JLR: Wholesales in 2Q were lower than planned by JLR (at 75k vs 90k expectation) due to a shortage in supply of specialised chips from a specific supplier. However, vendor issue is now sorted out and management expects volumes >160k units in 2H (147k in 1H); supplies should step-up in FY23. We expect realizations to further improve as supplies for New
- RR and RR Sport ramp-ups up (current production of 2.4k/week vs 1.1k/week in Jun-22) - premium model Defender, RR and RR Sport account for 72% of the order book (205k units).
- CV segment: Segmental EBITDA contracted 50bps QoQ to 5%. Owing to seasonality and residual commodity cost impact from previous months. Management highlighted that contribution from CNG is coming down in the mix owing to narrowing gap between fuel and gas prices.
- PV business: Domestic market share has improved to 14.1% vs 12.1% in FY22 led by revamped portfolio (especially in the SUV space) and rising EV penetration. (EV market share stands ~88% vs 87% in FY22). Posted highest EV sales of 20.8k units in 1H (19.1k in FY22). PV margins at 5.4%, -70bps QoQ.
Improved product mix at JLR benefit margins
Tata Motors' 2QFY23 consolidated revenue surprised at Rs 796bn (+11% QoQ, PLe: 762mn) largely led by improved product mix at JLR. Though JLR reported merely 5% QoQ growth in wholesales, ASPs improved 14% on the back of improved supplies of New RR/RR Sport (current production of 2.4k/week vs 1.1k/week in Jun-22). This also led to ~400bps QoQ of EBITDAM (10.3%) improvement. We expect margins to further improve in 2H led by improved realizations and product mix (Defender, RR and RR Sport account for 72% of the order book 205k units). Chip supply issue is now sorted out and management expects volumes >160k units in 2H (147k in 1H); supplies should step-up in FY23. For the PV and CV business, 70bps of impact came on EBITDAM from residual high commodity costs - PV/CV EBITDAM contracted 70/50bps QoQ.
Buy for a target price of Rs 520 per share
"We maintain our positive stance on TTMT as the (1) Likely market share gains in PV segment (14.2% vs 6.9% in FY19) led by revamped portfolio, customer preference for SUVs and rising EV penetration, (2) CV volumes gains from cyclical upturn, improving fleet utilization and freight rates and (3) revival in JLR and strong order book to benefit and drive FCF generation. We trim our EBITDA estimates by 9/3% for FY24/25 to factor in moderation in volume growth at JLR and cost pressures. Maintain BUY, with revised SoTP based Sep-24 TP of Rs 520 at 11.5x EV/EBITDA for standalone operations, 2x EV/EBITDA for JLR and 8x for PV business," the brokerage has said.
Disclaimer
The stock has been picked from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.
