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Tata Motors – Stock For the Month of October 2018

Price: Rs. 185

About the Company

Tata Motors operates in 2 business segments – Automotive Operations and Others

[1] Automotive operations accounts for 98.95% of the total revenues. The Company’s automotive operations segment is further divided into Tata and other brand vehicles (including vehicle financing) and Jaguar Land Rover.

Jaguar Land Rover contributed 76% in FY 2018 (79% in 2017) of the Company’s total automotive revenue and only the remaining 24% in FY 2018 (21% in FY 2017) came from Tata and other brand vehicles.

 [2] Others – The other operations business segment includes information technology, machine tools and factory automation solutions.

Clearly, Tata Motors stock price is largely being driven by JLR sales and company’s Indian operations have been a drain on its financials.

FINANCIAL PERFORMANCE

 

Tata Motors Standalone

Jaguar Land Rover

(In Rs. Cr.)

Q1 FY 2018

Q1 FY 2019

Q1 FY 2018

Q1 FY 2019

Net Revenue

9,198

16,803

54,338.30

50,679.51

EBITDA

(59)

1,396

4,289.61

3,154.13

EBITDA %

(0.6%)

8.3%

7.9%

6.2%

PBT

(463)

1,464

5,541.56

(2,562.12)

PAT

(463)

1,188

4,386.66

(2,038.05)

Conversion exchange rates for above data: 1 GBP = Rs. 97.05

Financial Position

Particulars

FY14

FY15

FY16

FY17

FY18

Revenue (In Rs. Cr.)

232,833.66

262,796.33

275,561.11

274,492.12

295,409.34

Growth

12.87%

4.86%

-0.39%

7.62%

EBITDA (In Rs. Cr.)

34,837.70

39,238.65

36,756.23

29,588.69

34,526.38

EBITDA Margin

14.96%

14.93%

13.34%

10.78%

11.69%

PAT (In Rs. Cr.)

13,991.02

13,986.29

11,023.75

7,556.56

9,091.36

PAT Margin

6.01%

5.32%

4.00%

2.75%

3.08%

EPS (In Rs.)

43.6

43.43

32.7

22.03

26.55

EPS Growth Rate

-0.40%

-25%

-33%

20.52%

Historic P/E (Closing Price of 31st March)

9.66

10.86

11.81

21.77

12.3

CURRENT P/E (based on price of 9th Oct – Rs. 185

6.97

D/E

0.84

1.23

0.78

1.28

0.82

Interest Coverage

7.36

8.07

7.95

6.98

7.37

ROCE

28.80%

31.16%

25.39%

22.25%

19.85%

ROE

21.33%

24.86%

13.65%

13.01%

9.53%

INVESTMENT RATIONALE

Growth in Domestic Business

In Q1 FY 2019, the Company registered a growth of 58.8% at 176,868 units as against 111,347 units due to the continued strong sales performance of its Commercial and Passenger Vehicles Business in the domestic market.

In the domestic market, M&HCV trucks grew 111%, ILCV trucks +73%, SCV & Pick ups +57% and CV Passenger +31%. PV was up 50%. CV growth reflects launch of new products and higher economic activities due to improved industrial activity, robust demand in private consumption and government spending on infra.

The Company’s Nexon, Tiago and Tigor continued to deliver strong growths.

The Company has also reported net profit of Rs. 1,188 Cr. (on standalone basis) in Q1 FY 2018. The Company’s standalone business had been loss-making for four consecutive years.

Gaining Market Share in both Commercial and Passenger Vehicles

The Company is on track to regain market share in both commercial and passenger vehicles. In the commercial vehicle market, demand for higher tonnage vehicles, increased government funding & growth in e-commerce has helped. For the passenger vehicle segment, some of the product launches like Nexon, Tiago, Tigor and Hexa have been received well by customers.

Government Push To Electric Vehicles (EV)

The government’s push towards electric vehicle will also prove to be positive for the Company. According to SIAM, electric vehicles will constitute 40% for overall new car sales by 2030. On 8th March, 2018, Energy Efficiency Service Ltd (ESSL) has floated another tender for 10,000 electric cars.

Earlier in December 2017, Tata Motors has successfully supplied its first batch of Tigor EV to ESSL, as part of the tender for 10,000 electric vehicles floated by the government in September.

Also in Auto Expo 2018, Tata Motors unveiled its range of six electric vehicles across personal as well as mass mobility categories.

Available at Discount As Compared to its Peers

INVESTMENT CONCERNS

WHY IS TATA MOTORS STOCK PRICE FALLING – the reason should really be Jaguar Land Rover (JLR) Motors.