Buy Tata Motors, target Rs 353: Motilal Oswal Securities

Motilal Oswal Securities has a buy call on Tata Motors with a target price of Rs 353.

The current market price of Tata Motors is Rs 262.65.

Time period given by the brokerage is one year when Tata Motors price can reach the defined target.


Investment rationale by Motilal Oswal Securities:
JLR’s wholesale volumes declined 4 per cent YoY (+21.9 per cent MoM) to 42.7k units (estimated 29.5k units), including China JV volumes at 4.1k units in Aug-2018.

Jaguar volumes increased 29.4 per cent YoY (+14.3 per cent MoM) at 14.2k units (estimated 9.5k units), while Land Rover volumes declined 14.9 per cent YoY (+26 per cent MoM) to 28.5k units (estimated 20k units).

JLR’s retail volumes declined by 4.9 per cent YoY (+1.3 per cent MoM) to 36.6k units as Jaguar retail increased 7.7 per cent YoY (+7.4 per cent MoM) to 11.8k units, driven by the introduction of E-PACE and I-PACE, as well as XE long wheelbase sales in China.

LR retail declined by 9.9 per cent YoY (-1.3 per cent MoM) to 24.8k units as increased sales of the Velar and refreshed Range Rover were offset by an impact of lower sales in China due to Range Rover Evoque and Discovery Sport.

In Jaguar, all brands witnessed a decline except XE, which grew 14 per cent YoY (+8.8 per cent MoM). E-pace and I-Pace volumes came in at 2.8k units and 140 units respectively.

LR’s retail volumes declined 9.9 per cent YoY (-1.3 per cent MoM) to 24.8k as most models witnessed a decline except Range Rover (+1.9 per cent YoY) and Velar, which reported 4.3k units in Aug-2018 (1.6k units in Aug-17).

Region-wise, volumes in the US, the UK and rest of the world (RoW) markets increased YoY by 2.5 per cent, 65 per cent and 20.2 per cent, respectively, while in Europe and China market it declined by 3 per cent and 38 per cent YoY, respectively.

Mr. Felix Brautigam, Chief Commercial Officer of Jaguar Land Rover said, “We are continuing to see challenges in our key markets. The China market is seeing uncertainty following tariff changes and trade tensions, although lower tariffs on UK imports should be beneficial over the full year. Concerns over diesel and Brexit continue to weigh on the industry in the UK and Europe, although August UK sales were encouraging.”

On the progress of Worldwide Harmonised Light Vehicle Test Procedure (WLTP), he said, “Amid industry-wide delays, we made excellent progress to vehicle certification last month. Most of our vehicles are now WLTP-certified. Hence, we are confident that our award-winning vehicle line-up will boost sales as we move into the autumn months.”

The stock trades at 9.2/7.2x FY19E/20E consolidated EPS. Maintain Buy with a target price of INR353 (September-2020 SOTP-based).