Tata Motors Ltd (TML) is a large-cap company in the automobile industry with a market capitalization of Rs 134,785.67 crore. The stock has risen 28 per cent in a year and is currently down -19.08 per cent year-to-date (YTD). The stock reached a 52-week high of Rs 536.70 on November 17, 2021, and a 52-week low of Rs 268.45 on August 24, 2021, implying that the stock has dropped 24% from its 52-week high to the current market price of Rs 407.85. The company recently announced its Q4FY22 results, following which ICICI Securities has selected the stock with a buy rating with a target price of Rs 500 in the next 12 months.
Q4FY22 results of Tata Motors as per ICICI Securities
- Consolidated total operating income was up 8.6% QoQ at Rs 78,439 crore.
- EBITDA margins were at 14.7%, up 210 bps QoQ.
- Consolidated loss after tax was at Rs 1,033 crore.
- EBITDA margins in Q4FY22: JLR - 12.6%, Indian CV- 5.9% & India PV- 6.9%.
Key investment rationale for Tata Motors according to the brokerage
- We expect a healthy 13.2% revenue CAGR over FY22-24E backed by 15.8% total volume CAGR amid strong order book at JLR (1.68 lakh units).
- Cost control, efficiency improvement-led FCF generation targets for ongoing deleveraging push (FY22 net automotive debt at ~Rs 48,700 crore).
- Continued EV alertness in India through concepts & real launches (PV market leader with Nexon; plans to introduce 10 models by 2025) and JLR (Jaguar all-electric by 2025; 6 BEVs in Land Rover in next five years).
- Margins seen at 14.3% in FY24E along with RoCE at ~13.7%.
Buy for a target price of Rs 500 per share
ICICI Securities has claimed in its latest report that "TML's stock price has been flattish over the past five years (~Rs 430 levels in May 2017), underperforming the Nifty Auto index. We retain BUY on positive demand outlook, impressive margin & FCF targets for FY23E and intent to be net debt free (automotive) by FY24E. We now value TML at Rs 500 on SOTP basis (10x, 3x FY24E EV/EBITDA in India, JLR; Rs 160 value to Indian EV business; earlier TP Rs 550)."
Slower than anticipated volume recovery over FY22-24E, and continuing chip shortage & lockdown in China to impact sales at Jaguar Land Rover (JLR) remain the key risks for the stock as per ICICI Securities.
The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the author, and the 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 taking any investment decisions.