Macquarie upgrades Tata Motors to 'outperform'
Macquarie upgrades the rating on Tata Motors to `Outperform’ with a target price of Rs 789, an upside of 19%.
By ET Bureau |
CMP: Rs 710
Macquarie upgrades the rating on Tata Motors to `Outperform’ with a target price of Rs 789, an upside of 19%. Tata Motors is to benefit significantly from the revival in sales in the domestic and developed markets on the back of a macro economic recovery. This along with the aggressive cost-cutting measures being undertaken at Jaguar Land Rover (JLR) should result in a significant jump in consolidated EPS over the next couple of years.
Tata Motors’ commercial vehicle (CV) business will likely drive growth in the domestic business. They expect CV volumes to grow by an average of ~23% for FY10 and FY11 on the back of a revival in the overall economy and a pickup in industrial activity, easier availability of finance, improvement in freight rates and changes in emission norms. JLR is to turn profitable in FY11 (profit of £138m versus loss of £337m in FY09) on the back of a recovery in volumes and various cost-reduction initiatives being implemented by the company.
JLR’s contribution to the consolidated EPS is likely to increase meaningfully if the recovery in the developed markets gathers pace or JLR’s new products receive an overwhelming response from customers. Tata Motors’ consolidated EBITDA is to double over the next couple of years and the stock is currently trading at ~8.1x FY11E consolidated EV/EBITDA.
Macquarie upgrades the rating on Tata Motors to `Outperform’ with a target price of Rs 789, an upside of 19%. Tata Motors is to benefit significantly from the revival in sales in the domestic and developed markets on the back of a macro economic recovery. This along with the aggressive cost-cutting measures being undertaken at Jaguar Land Rover (JLR) should result in a significant jump in consolidated EPS over the next couple of years.
Tata Motors’ commercial vehicle (CV) business will likely drive growth in the domestic business. They expect CV volumes to grow by an average of ~23% for FY10 and FY11 on the back of a revival in the overall economy and a pickup in industrial activity, easier availability of finance, improvement in freight rates and changes in emission norms. JLR is to turn profitable in FY11 (profit of £138m versus loss of £337m in FY09) on the back of a recovery in volumes and various cost-reduction initiatives being implemented by the company.
JLR’s contribution to the consolidated EPS is likely to increase meaningfully if the recovery in the developed markets gathers pace or JLR’s new products receive an overwhelming response from customers. Tata Motors’ consolidated EBITDA is to double over the next couple of years and the stock is currently trading at ~8.1x FY11E consolidated EV/EBITDA.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
