Stock To Buy: This Automobile Stock Can Surge 43%, India CV Revenue Grew 29% YoY

Tata Motors has published its quarterly results yesterday late afternoon, and the share price of the company has gained around 8% in early trade. The company's consolidated net loss has narrowed to Rs. 1,032.8 crore in Q4, FY22; compared with a loss of Rs. 7,605 crore in the same quarter last year. Considering this development and other growth potentials, brokerage firm Emkay Global has given a buy status to this stock.

Target Price

The Current Market Price (CMP) of Tata Motors is Rs. 372. Emkay Global has estimated a Target Price for the stock at Rs. 535. The stock is expected to offer a 43.7% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 372
Target Price	Rs. 535
1 year return	43.70%

Stronger demand for New Range Rover has pushed the company's order book to a new record at more than 168,000 units. Volumes are expected to develop progressively over Q2FY23-Q4FY24, and the target is to achieve a 5% EBIT margin and GBP1bn+ positive free cash flow in FY23.

Comments by Emkay Global

Reaffirming buy status, Emkay Global said, "We reduce FY22E/23E consolidated EBITDA by 7%/5%, mainly due to lower JLR volumes. Following the revision, we expect robust revenue/EBITDA CAGRs of 23%/44% over FY22-24E. We expect a strong 20% CAGR over FY22-24E. We estimate FY22-24 India CV/PV volume CAGRs of 17%/18%, driven by the continuation of an industry sales upcycle, new products, and better chip supplies. The focus remains on E-PVs, with medium-term investments of US$2bn toward new products, capacity expansion, localization, and charging infra. Our TP is based on India CV business valuation of 12x EV/EBITDA (in line with Ashok Leyland's historical valuations of 12x), or Rs. 168/share; India PV business (excluding EV) at 5x (notable discount to Maruti Suzuki's historical valuations of 13x, factoring in reducing the share of the ICE segment in the long term)."

About the company

Tata Motors Group (Tata Motors) is a $34 billion organization. It is a leading global automobile manufacturing company. Its diverse portfolio includes an extensive range of cars, sports utility vehicles, trucks, buses, and defense vehicles. Tata Motors is one of India's largest OEMs offering an extensive range of integrated, smart, and e-mobility solutions. Their marque can be found on and off-road in over 125 countries around the globe. Recently, the company's India CV revenue grew 29% YoY to Rs. 173bn. EBITDA fell 7% to Rs. 11.1bn above estimates due to lower employee/other expenses. India PV revenue rose 62% YoY to Rs. 105Bn, EBITDA grew 121% to Rs. 7.3bn. The company's consolidated EBITDA fell 31% YoY to Rs. 87.4bn. Consolidated revenue fell 11% YoY to Rs. 784bn, JLR's order book is strong at ~168,000 units, while dealer inventories are low. New generation products like RR/RR Sport are expected to support order bookings ahead.

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. 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.