CLSA maintains ‘underperform’ rating on Tata Motors
CLSA maintains ‘underperform’ rating on the stock with a revised target price of Rs 320.
TATA MOTORS
RESEARCH: CLSA
RATING: UNDERPERFORM
CMP: RS 243
CLSA maintains ���underperform��� rating on the stock with a revised target price of Rs 320. It views Tata Motors as a risky bet even after the sharp 60% year-to-date (YTD) correction. Domestic truck sales are weakening . Following the company���s exit from West Bengal, the large ���Nano��� volumes will flow only in FY11.
Jaguar Land Rover (JLR) sales in the western world remain weak and the sales growth in emerging markets may not last long. Moreover, the JLR pension fund and re-financing of JLR acquisition bridge loan remain overhangs on the stock.
Tata Motors needs to refinance $3 billion of the JLR acquisition bridge loan by June ���09. This still leaves $1.9 billion, which needs to be raised via a combination of foreign equity issuance ($500 million), sale of stakes in subsidiaries ($670 million) and raising of working capital facilities at JLR ($700 million).
Also, the extent of deficit in the JLR pension fund (size ~$8 billion) will be known only by April ���09, when the next actuarial valuation takes place. Till JLR manages to strike a favourable deal with pension trustees, this will remain an overhang on the stock.
RESEARCH: CLSA
RATING: UNDERPERFORM
CMP: RS 243
CLSA maintains ���underperform��� rating on the stock with a revised target price of Rs 320. It views Tata Motors as a risky bet even after the sharp 60% year-to-date (YTD) correction. Domestic truck sales are weakening . Following the company���s exit from West Bengal, the large ���Nano��� volumes will flow only in FY11.
Jaguar Land Rover (JLR) sales in the western world remain weak and the sales growth in emerging markets may not last long. Moreover, the JLR pension fund and re-financing of JLR acquisition bridge loan remain overhangs on the stock.
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Tata Motors needs to refinance $3 billion of the JLR acquisition bridge loan by June ���09. This still leaves $1.9 billion, which needs to be raised via a combination of foreign equity issuance ($500 million), sale of stakes in subsidiaries ($670 million) and raising of working capital facilities at JLR ($700 million).
Also, the extent of deficit in the JLR pension fund (size ~$8 billion) will be known only by April ���09, when the next actuarial valuation takes place. Till JLR manages to strike a favourable deal with pension trustees, this will remain an overhang on the stock.
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