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Overview Equity Derivative Equity Trending News Apr 06, 2023 04:14 PM NIFTY: 17,599.15  42.10(0.24 %) SENSEX: 59,832.97  143.66(0.24 %)

Research  Equity Research  Investing-Ideas  Tata Motors Ltd

  Back BUY

Tata Motors Ltd

Automobile | NSE : TATAMOTORS

CMP : 437.7  Chg : 11.10 (2.60%) Target : 500.0 (25.0%) Target Period : 12-18 Month RESULT UPDATE
14 May 2022

Aiming near net debt free (automotive) by FY24…

About The Stock

Tata Motors (TML) is an auto OEM from the house of Tatas, operating in domestic (PV, CV) as well as global markets (Jaguar Land Rover i.e. JLR)

JLR is a luxury car brand, which includes two prominent names i.e. Jaguar (models like I-pace, etc.) & Land Rover (models like Defender,
Evoque, etc)

FY22 consolidated sales mix– JLR ~67%, India CV ~19%, India PV ~11%.

Q4FY22 TML reported healthy Q4FY22 results.

Consolidated total operating income was up 8.6% QoQ at ₹ 78,439 crore

EBITDA margins were at 14.7%, up 210 bps QoQ

Consolidated loss after tax was at ₹ 1,033 crore

EBITDA margins in Q4FY22: JLR – 12.6%, Indian CV- 5.9% & India PV- 6.9%

What should Investors do?

TML’s stock price has been flattish over the past five years (~₹ 430 levels in May 2017), underperforming the Nifty Auto index.

We retain BUY on positive demand outlook, impressive margin & FCF targets for FY23E and intent to be net debt free (automotive) by
FY24E

Target Price Valuation

We now value TML at ₹ 500 on SOTP basis (10x, 3x FY24E EV/EBITDA on India, JLR; ₹160 value to Indian EV business; earlier TP ₹ 550).

Key Triggers for future price performance

We expect healthy 13.2% revenue CAGR over FY22-24E backed by 15.8% total volume CAGR amid strong order book at JLR (1.68 lakh units)

Cost control, efficiency improvement-led FCF generation targets for ongoing deleveraging push (FY22 net automotive debt at ~₹ 48,700
crore)
Continued EV alertness in India through concepts & real launches (PV market leader with Nexon; plans to introduce 10 models by 2025)
and JLR (Jaguar all-electric by 2025; 6 BEVs in Land Rover in next five years)
Margins seen at 14.3% in FY24E along with RoCE at ~13.7%

Need Help ?
New Stock Ideas
Apart from TML, in our OEM coverage we also like M&M. IPOs

Focused on prudent capital allocation, UV differentiation & EV proactiveness Statements

BUY with target price of ₹ 1,045

 Particulars Shareholding pattern

Result Update
Particulars (₹ crore) Amount (in %) Mar 22 Jun 22 Sep 22 Dec 22
Market Capitalization 145,356.3 Promoters 46.4 46.4 46.4 46.4
Total Debt (FY22P)) 139,677.0 FII 14.5 13.7 14.1 13.9
Cash & Investment (FY22P) 63,378.0 DII 6.5 6.8 6.5 6.9
Enterprise Value 229,459.0 Others 32.7 33.1 32.9 32.8
52 week H/L (₹) 494.4/366.2
Equity Capital 765.9
Face Value (₹) 2.0

Price Chart Recent Events & Key Highlights

1D 1W 1M 3M 1Y 5Y MAX  Reports healthy performance in Q4FY22. JLR margins at
12.6%
436.00
Key Risk: (i) Slower than anticipated volume recovery over
433.00 FY22-24E, (ii) Continuing chip shortage & lockdown in china
to impact sales at JLR.
430.00

427.00

424.00
10:00 12:00 14:00 16:00

ICICI Securities – Retail Equity Research

Research Analyst

Shashank Kanodia
[email protected]

Key Financial Summary

Key Financials FY19 FY20 FY21 FY22P 5 year CAGR (FY17-22P) FY23E FY24E 2 year CAGR (FY22P-24E)
Net Sales 301,938.4 261,068.0 249,794.8 278,453.6 0.6 321,160.9 356,857.3 13.2
EBITDA 29,794.8 23,914.1 35,782.0 34,022.7 0.6 40,669.2 50,925.7 22.3
EBITDA Margins (%) 9.9 9.2 14.3 12.2 - 12.7 14.3 -
Net Profit -28,724.2 -11,975.4 -13,395.0 -11,441.5
EPS (₹) -79.8 -33.3 -35.0 -29.9 - 1.7 21.1 -
P/E -5.0 -12.0 -11.4 -13.4 - 239.0 19.0 -
RoNW (%) -47.3 -18.7 -23.6 -23.4 - 1.3 14.0 -
RoCE (%) 3.7 1.3 6.3 4.8 - 8.1 13.7 -
- - - - - - - - -
Source: Company, ICICI Direct Research

Key takeaways of the recent quarter & Concall highlights

Q4FY22 Results:

Consolidated total operating income for the quarter came in at | 78,439 crore, up 8.6% QoQ. Reported EBITDA for Q4FY22 was at | 11,494 crore
with corresponding EBITDA margins at 14.7%, up 220 bps QoQ
Need Help ?
JLR wholesales at 89,148 units were up 7.3% QoQ with revenues flat QoQ at £4.8 billion. Margins were up 60 bps QoQ at 12.6%. JLR generated
positive FCF of £340 million IPOs

Indian operation (PV + CV) sales were at ₹29,020 crores amid 22% volume jump to ~2.4 lakh units. Margins were at 6.3% (CV margins up 330
Statements
bps QoQ at 5.9%, PV margins up 270 bps QoQ at 6.9%).

Q4FY22 Earnings Conference Call highlights

 The company’s commentary on demand remain strong amidst strong order book of 1.68 lakh units for JLR during Q4FY22 vs 1.55 lakh units in
Q3FY22 & longer waiting period for PV’s. Order book for new range rover increased to 46k from 31k in Q3FY22

Medium and long term JLR guidance maintained to achieve >5% EBIT margin at JLR, with Q4FY22 positive on EBIT with Q4FY22 margins at 2%
and £340 million FCF
JLR annualised breakeven wholesales levels have reached to 300k units in H2FY22 lower than target of 350k units in FY23. Going forward
break-even is expected to be at 85k units/quarter in FY23 due to normalisation of operations & rational sales of new Range Rover

Production lost in Q4FY22 due to chip shortage was ~10% in Indian operations

JLR had 64% electrified powertrain mix in Q4FY22 (BEV 3%, 10% PHEV, 50% MHEV) vs. 69% in Q3FY22 with electrification mix for FY22 at 66%
Management expects chip shortage to continue and improve gradually with Q1FY22 to witness muted sales due to China lockdown. Delivery
of new Range Rover will start from Q2FY23

Geopolitical political issues did not affect company in material way as <2.5% of combined sales from both countries, further only a smart
number of parts are sourced from Russia & Ukraine
 Refocus program has achieved its target of £1.5 billion cash and cost improvements for FY22

CNG penetration in M&HCV to be limited due to requirement of high range and limited infrastructure whereas same for LCV to be higher due
to limited range requirement. CNG penetration in I&LCV is at 40%. Powertrain mix for CV for FY22 was 73% for diesel, 10% for petrol, 17% for
CNG+EV

Company launched 80+ products, 120 variants in FY22 leading to market share gain for CV by 250 bps YoY at 44.9%.

Company is operating a fleet of 250+ E-Bus fleet for BEST in Mumbai & Ahmedabad under wet lease model. Further management informed
about for 15 FCEV powered bus order received from IOCL.
TML launched E-dukaan, an online store to purchase spare parts with revenue clocked ₹100 crores in FY22. Further management informed
spare part revenue have doubled over four year period.

Powertrain mix for PV was 72% petrol, 20% diesel, 5% EV, 3% CNG. EV market share stood at ~87% for FY22 with ~2,000 charging points.
Robust booking pipeline, strong market share, low channel inventory, available capacity to ramp up EV to act as growth triggers for FY23.
Management expect domestic PV industry to surpass FY19 demand in FY23

Financial Summary

Profit and loss statement ₹ crore Key ratios ₹ crore

(Year-end March) FY21 (₹) FY22P (₹) FY23E (₹) FY24E (₹) FY22P FY23E FY24E
(Year-end March) FY21 (₹)
Total operating (₹) (₹) (₹)
2,49,794.8 2,78,453.6 3,21,160.9 3,56,857.3
Income Per share data (₹)
Growth (%) -4.3 11.5 15.3 11.1 EPS -35.0 -29.9 1.7 21.1
Raw Material Cash EPS 26.5 35.0 68.8 91.0
1,58,291.5 1,80,885.9 2,11,704.5 2,35,286.2
Expenses BV 148.4 127.5 129.2 150.3
Employee Expenses 27,648.5 30,808.5 31,225.3 31,943.1 DPS 0.0 0.0 0.0 0.0
Marketing Expenses 40,922.0 47,133.8 53,619.9 56,545.0 Cash Per Share 172.0 165.5 167.7 166.8
Capitalised Expenses -12,849.1 -14,397.3 -16,058.0 -17,842.9 Operating Ratios
Total Operating EBITDA Margin (%) 14.3 12.2 12.7 14.3
2,14,012.8 2,44,431.0 2,80,491.6 3,05,931.5
Expenditure
PBT / Net sales (%) 4.9 3.3 4.7 6.8
EBITDA 35,782.0 34,022.7 40,669.2 50,925.7
PAT Margin (%) -5.4 -4.1 -4.8 1.0
Growth (%) 49.6 -4.9 19.5 25.2
Inventory days 52.7 46.2 50.0 50.0
Product
5,226.6 9,209.5 7,821.0 8,683.7 Debtor days 18.5 16.3 20.0 20.0
development Exp
Creditor days 99.6 78.6 90.0 90.0
Depreciation 23,546.7 24,835.7 25,692.9 26,764.3
Return Ratios (%)
Interest 8,097.1 9,311.8 9,567.4 8,762.4
RoE -23.6 -23.4 1.3 14.0
Other Income 2,643.2 3,053.6 3,132.2 3,304.7
RoCE 6.3 4.8 8.1 13.7
PBT 8,513.5 2,835.7 8,541.1 18,703.8
RoIC 11.4 7.9 13.3 22.6
Minority Interest 0.0 132.7 163.2 179.5
Valuation Ratios (x)
Total Tax 2,541.9 4,231.3 144.0 2,254.5
P/E (adjusted) 22.2 10.4
Reported PAT -13,395.0 -11,441.5 640.9 8,061.1
EV / EBITDA 6.2 6.7 5.5 4.0
Growth (%) -105.6 1,157.8
EV / Net Sales 0.9 0.8 0.7 Need Help
0.6 ?
EPS (₹) -35.0 -29.9 1.7 21.1
Market Cap / Sales 0.6 0.6 0.5 0.4
Source: Company, ICICI Direct Research IPOs
Price to Book Value 2.7 3.1 3.1 2.7
Solvency Ratios Statements
Debt/EBITDA 3.8 4.1 3.3 2.3
Debt / Equity 2.4 2.9 2.7 2.0
Current Ratio 0.6 0.6 0.6 0.6
Quick Ratio 0.3 0.3 0.3 0.3
Source: Company, ICICI Direct Research
 Balance Sheet ₹ crore Cash flow statement ₹ crore
(Year-end March) FY21 (₹) FY22P (₹) FY23E (₹) FY24E (₹) (Year-end March) FY21 (₹) FY22P (₹) FY23E (₹) FY24E (₹)
Liabilities Profit after Tax -13,395.0 -11,441.5 640.9 8,061.1
Equity Capital 765.8 765.9 765.9 765.9 Add: Depreciation 23,546.7 24,835.7 25,692.9 26,764.3
Reserve and Surplus 54,480.9 43,795.4 44,436.3 52,497.3 (Inc)/dec in Current
-6,045.3 -2,555.1 -13,793.7 -7,822.1
Others 1,573.5 4,271.1 4,271.1 4,271.1 Assets

Total Shareholders Inc/(dec) in CL and

56,820.2 48,832.3 49,473.2 57,534.3 9,998.6 -6,188.1 24,877.1 13,677.0
funds Provisions

Total Debt 1,35,904.5 1,39,677.0 1,33,677.0 1,16,677.0 Others 21,443.6 9,311.8 9,567.4 8,762.4

Deferred Tax Liability 1,555.9 1,558.4 1,797.5 1,997.2 CF from operating

35,548.6 13,962.8 46,984.5 49,442.7
activities
Long term provisions 13,606.8 12,955.9 14,943.0 16,603.9
(Inc)/dec in
Minority Interest / -8,311.8 -4,759.2 -750.0 250.0
21,095.0 19,640.9 22,653.2 25,171.1 Investments
Others
(Inc)/dec in Fixed
Total Liabilities 2,28,982.4 2,22,664.5 2,22,543.9 2,17,983.5 -33,808.7 -14,267.2 -32,000.0 -25,000.0
Assets
Assets
Others 4,317.4 1,026.1 1,672.6 1,233.9
Gross Block 3,46,703.1 3,71,683.1 4,06,183.1 4,33,683.1
CF from investing
Less: Acc -37,803.2 -18,000.3 -31,077.4 -23,516.1
2,08,799.2 2,33,634.9 2,59,327.8 2,86,092.1 activities
Depreciation
Issue/(Buy back) of
Net Block 1,37,903.9 1,38,048.2 1,46,855.4 1,47,591.1 46.3 0.1 0.0 0.0
Equity
Capital WIP 20,963.9 10,251.1 7,751.1 5,251.1 Inc/(dec) in loan
17,094.0 3,772.5 -6,000.0 -17,000.0
Total Fixed Assets 1,58,867.8 1,48,299.3 1,54,606.4 1,52,842.1 funds
Investments 24,620.3 29,379.5 30,129.5 29,879.5 Dividend paid &
0.0 0.0 0.0 0.0
Inventory 36,088.6 35,240.3 43,994.6 48,884.6 dividend tax

Debtors 12,679.1 12,442.1 17,597.9 19,553.8 Inc/(dec) in Sec.

3,423.7 0.0 0.0 0.0
premium
Loans and Advances 1,749.4 1,671.9 1,928.4 2,142.7
Others (incl finance
Cash 46,792.5 40,669.2 41,009.0 41,173.2 -5,244.0 -5,858.3 -9,567.4 -8,762.4
costs)
Total Current Assets 1,27,836.5 1,24,268.4 1,38,401.8 1,46,388.1
CF from financing
Creditors 68,179.8 59,970.4 79,190.4 87,992.2 15,320.1 -2,085.8 -15,567.4 -25,762.4
activities
Provisions 12,848.0 10,766.3 13,820.9 15,357.0 Net Cash flow 13,065.5 -6,123.3 339.8 164.2
Total Current Opening Cash 33,726.9 46,792.5 40,669.2 41,009.0
1,14,143.5 1,07,955.4 1,32,832.5 1,46,509.5
Liabilities
Closing Cash 46,792.5 40,669.2 41,009.0 41,173.2
Net Current Assets 13,693.0 16,313.0 5,569.3 -121.4
Source: Company, ICICI Direct Research
Deferred Tax Asset 4,520.4 3,870.8 4,464.5 4,960.8
Application of Funds 2,28,982.4 2,22,664.5 2,22,543.9 2,17,983.5
Source: Company, ICICI Direct Research

Terms & conditions and other disclosures

ANALYST CERTIFICATION
I/We, Shashank Kanodia, CFA, MBA (Capital Markets), and Raghvendra Goyal, CA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our

views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indi... 

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