Asia Pacific Research – September 2, 2023

Equity Research Report

Tata Motors Limited

Gearing up to Compete, Maintain BUY!
Reco :BUY
About the Company CMP 611
Target Price 750
Tata Motors Limited is an Indian multinational automotive
Potential Target +22.7%
manufacturing company, headquartered in Mumbai, India, which is
part of the Tata Group. The company produces passenger cars, Stock Data (as on August 11, 2023)
trucks, vans, coaches, buses, sports utility vehicles and defense Nifty 19,428
vehicles. 52 Week H/L (in Rs.) 665.40 / 375.20
Market Cap (Rs/USD mn) 22,300 / 268.82
TML has its presence in 125 countries through 104 subsidiaries, Outstanding Shares (mn) 764
Dividend Yield (%) 0.33%
associate companies and joint ventures, including Jaguar Land
NSE Code TATAMOTORS
Rover in UK Tata Daewoo in South Korea. It has 25 manufacturing
facilities and 6 R&D facilities worldwide.
Stock Performance (1 Year)
Tata Motors operates into 5 major business segments which are Nifty TML
Commercial Vehicles, Passenger Vehicles, Jaguar Land Rover
(Premium Luxury) & Vehicle Financing.

Q1FY2024 – Result Summary

The company declared that consolidated profit of Rs 3,300 crore for
the June quarter compared with a loss of Rs 4950 crore in the same
quarter last year. Consolidated revenue for the quarter came in at Aug 22 Nov 22 Feb 23 May 23
Rs 1,02,236 crore, up 42.1 per cent.
1M 3M 1Y
EBITDA for the quarter stood at Rs 14,681 crore, which was up 177 Absolute Return -2% 20% 29%
per cent. EBIT came in at about Rs 8,259 crore, which was driven by Shareholding Pattern (June 30, 2023)
JLR and CV business while PV business remain steady. Promoters 46.3%
FIIs 17.7%
Tata Motors free cash flow for June quarter was positive by Rs DIIs 17.3%
2,500 crore which increased from negative Rs 9,800 crore this Government 0.1%
quarter last year. Net automotive debt got reduced to Rs 41,700 Public 18.3%
crore.
Financial Summary
Jaguar Land Rover (JLR) improved by 57 per cent to £6.9 billion on Rs (in bln) FY23 FY24E FY25E
strong wholesales and improved mix resulting in EBIT margins of 8.6 Net Revenue 3,459 4,422 4,667
per cent. And Free Cash Flow turning positive to £451 million.
YoY Growth (%) 24.0% 27.8% 5.5%
EBITDA 318 579 614
Commercial Vehicle (CV) improved by 4.4 percent, but revenue
EBITDA (%) 9% 13% 13%
declined on Q-o-Q basis which was due to transition to BS6 Phase 2
which is now complete. EBIT margin stood at 6.5 per cent. PAT 26 157 154
YoY Growth (%) 123.0% 503.8% -1.9%
Passenger Vehicle (PV) business improved by 11.1 per cent, EBITDA ROE (%) 1.8% 30.1% 23.3%
margin was down by 80 bps to 5.3 per cent and EBIT margin was EPS 7.27 41.1 42.1
poor by 1%. P/E (x) 20.1 14.9 14.5
P/BV (x) 4.4 4.1 3.2
Tata Motors said it remains optimistic on the demand situation Source :- Motilal Oswal Financial Services

despite near term uncertainties and expect a moderate inflationary

Prepared By : Niket Soni
environment to continue in the near term. Guided By : Parth Verma, The Valuation School
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Asia Pacific Research – September 2, 2023

Tata Motors Limited

Exhibit 1 : Quarterly Snapshots

Particulars (Rs. bln) Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 %QoQ
Revenue 664 613 722 784 719 796 884 1,059 1,022 42.1%
COGS 423 407 456 511 478 522 574 681 637 33.3%
Gross Profit 241 206 266 273 241 274 310 378 385 59.8%
Gross Margin (%) 36.3% 33.6% 36.8% 34.8% 33.5% 34.4% 35.1% 35.7% 37.7% 400bps
Staff Cost 79 71 76 80 77 78 85 93 98 27.3%
Depreciation 62 61 60 64 58 58 60 70 66 13.8%
Other Op. Expenses 143 128 152 148 177 180 116 152 153 -13.6%
Operating Income -9 -20 9 18 -34 -3 47 60 65 -291.2%
OPM (%) -1.4% -3.3% 1.2% 2.3% -4.7% -0.4% 5.3% 5.7% 6.4% 1100bps
Interest 22 23 24 23 24 24 26 26 26 8.3%
Exceptional Items 0 -0 8 -7 14 3 -0 -2 -6 -142.9%
PBT -25 -34 -6 -3 -34 -14 32 47 46 -235.3%
Tax 17 10 7 7 15 -4 2 -6 15 0.0%
PAT -42 -44 -13 -10 -49 -10 30 53 31 -163.3%
Source :- Company Reports, The Valuation School Research

Exhibit 2 : Supplemental Metrics

Particulars (Rs. bln) Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Trend
EBITDA 162 135 190 193 164 196 225 285 287
EBIT -9 -20 9 18 -34 -3 47 60 65
EPS -13.4 -13.4 -4.6 -3.1 -15.1 -2.8 8.9 16.3 9.6
Effective Tax Rate (%) -68.0% -29.0% -119.0% -222.0% -44.0% 31.0% 8.0% -13.0% 34.0%

Source :- Company Reports, The Valuation School Research

Exhibit 3 : Key Ratios Movements

Particulars Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24
EV/Total Revenue 2.9 3.2 2.7 3.2 3.5 3.1 2.8 2.2 2.3
EV/EBITDA 12.1 14.5 10.3 10.1 11.9 10.0 8.7 6.9 6.8
EV/EBIT -217.2 -97.8 217.2 108.6 -57.5 -651.7 41.6 32.6 30.1
P/E -25.2 -24.8 -105.2 -139.0 -27.2 -142.0 43.4 25.8 61.6
P/S 0.4 0.5 0.7 0.6 0.6 0.5 0.4 0.4 0.6
Source :- Company Reports, The Valuation School Research

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Tata Motors Limited

Con-Call Q1FY24 – Key Highlights

JLR Update

• Order book remains strong at 185k level.

• Net auto debt is now down to just below GBP 2.5 billion from GBP 3 billion from the end of last quarter.
• Liquidity remains strong with 4 bln in cash and RCF of 1.5 bln.
• Right now the focus is on the RR and Defender, Velar is between facelift transition phase and Discovery and Jaguar is
in the incarnation phase.
• Overseas and N. America is running extremely strong, facing small challenges within the UK and Europe.
• The UK has a specific issue, as there's always a seasonality between Q4 and Q1 within the UK, which is the reason,
the sales are impacted in UK
• There is an underlying issue in both the UK and Europe, which is, some supply shortages due to constraints within our
PHEV supply system, PHEV, particularly on the Range Rover where extremely high demand and company is still
working with supply base to make up for the demand, which answers the drop of sales in UK and Europe on Q-o-Q
basis.
• Total Investment of GBP 697 mn of which GBP 174 mn is capital investment and the rest is engineering capitalization.
• In Solihull, RR/RRS capacity is 2800 per week and working on Solihull body shops to extend the capacity till 3000 per
week.

CV Update

• The decline in revenue was because of major sales in Q4FY23 and also due to transition from BS6 Phase 1 to Phase
2 which is now complete.
• Non-vehicle business revenue grew by 25%.
• Started field trials of the BS6 Phase 2 vehicles, which is also indicating a very good performance improvement over
this BS6 Phase 1, and good customer acceptance.
• On international markets, the volumes still remain subdued, due to geopolitical situation and economic slowdown.
• Gross Cost Contract EV Operational revenue in Q1 was around Rs. 133 crores.

PV Update

• Market share increased from 13.5% to 14.2%.

• EV volumes, Charging Infra and Sales Network are increasing on a consistent trend.
• SUV sales have increased at a cost of decrease in the Hatches and Sedan segment, Tigor EV and Altroz CNG saved
the sedan segment.
• EV sales volumes have increased by 22%.

TMF Update

• Profitability at INR22 crores, which is miniscule with the AUM of 42,000 cr.
• GNPA is now reducing on a quarter-on-quarter basis.

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Tata Motors Limited

Revenue Mix - Region

Others, 16%

India, 33%

China, 14%

EU & UK, 12%

USA, 16%

UK, 10%

India USA UK EU & UK China Others

Source :- Company Report

Capital Allocation Plans

• Total of product and other investment spending of around 38,000 crores in property, plants and equipment and
product development will be during FY 2023-24.
• In April 2023, JLR has investment plans of £15 billion over five years in its industrial footprint, vehicle programs,
autonomous, AI and digital technologies and people skills, as a part of its reimagine strategy.
• Tata Motors Limited (TML) and Tata Motors Passenger Vehicles Limited (TMPVL) expects to meet the investments
primarily out of their own operating cash flows.
• Tata Passenger Electric Mobility Limited (TPEML) will be largely funded from the funds received from TPG Rise
Climate of Rs 7,500 cr, Any additional funding requirements if needed, can be met through loans and other debt.
• Company business to be self sustaining and aim to be net cash positive by FY25.
• In Oct 2021, TML announced a commitment to invest over US$2 billion over the next five years to expand its EV
business.

Sector Outlook - Long term

• India’s annual production of automobiles in FY 2021-22 was 22.93 million vehicles.

• The Indian passenger car market was valued at US$ 32.70 billion in 2021, and it is expected to reach a value of US$
54.84 billion by 2027 while registering a CAGR of over 9% from 2022 to 2027.
• The EV market in India is likely to increase at a CAGR of 36% until 2026.
• Automobile Industry has the potential to contribute about 12% of the total GDP of the nation.

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Tata Motors Limited

Quarterly Trends
Exhibit 4 : Revenue grew up 42% YoY Exhibit 5 : EBITDA grew up 75% & margins 500bps YoY
Rs. bln Rs. bln and %
EBITDA EBITDA (%)
1000
400 30%
800 350
25%
300
600 20%
250
200 15%
400
150
10%
200 100
5%
50
0 0 0%
Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24
Source :- Company Reports Source :- Company Reports

Exhibit 6 : PAT grew up 163% & margins 1000bps YoY Exhibit 7 : EPS grew up 164%
Rs. bln and % Rs. Per share
PAT PAT (%)
14
6%
50
4% 9
30 2% 4

10 0%
-1
Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24
-2%
-10 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 -6
-4%
-30 -11
-6%
-50 -8% -16

Source :- Company Reports Source :- Company Reports

Exhibit 8 : FCF grew up 126% Exhibit 9 : Net Auto Debt reduced by 31%
Rs. bln
Net Auto Debt Interest Coverage Ratio
100 Rs. Bln & times
650 3.0
2.5
600
50 2.0
550 1.5
500 1.0
0 0.5
450 0.0
Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24
400 -0.5
-50 -1.0
350
-1.5
300 -2.0
-100 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24

Source :- Company Reports Source :- Company Reports

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Tata Motors Limited

Exhibit 10 : Yearly Snapshots

Particulars (Rs. bln) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Revenue 2,328 2,631 2,730 2,696 2,915 3,019 2,610 2,497 2,784 3,459
COGS 1,435 1,599 1,633 1,659 1,858 1,963 1,671 1,583 1,808 2,264
Gross Profit 893 1,032 1,097 1,037 1,057 1,056 939 914 976 1,195
Gross Margin (%) 38.4% 39.2% 40.2% 38.5% 36.3% 35.0% 36.0% 36.6% 35.1% 34.5%
Staff Cost 178 223 258 264 260 305 291 239 279 314
Depreciation 110 133 167 179 215 235 214 235 248 248
Other Op. Expenses 438 506 573 593 589 631 588 391 472 616
Operating Income 237 258 216 116 99 10 -34 87 -1 69
OPM (%) 10.2% 9.8% 7.9% 4.3% 3.4% 0.3% -1.3% 3.5% 0.0% 2.0%
Interest 47 48 48 42 46 57 72 80 93 102
Exceptional Items -9 -2 -18 11 19 -296 -28 -137 -6 15
PBT 188 217 141 93 111 -313 -105 -104 -70 30
Tax 47 76 30 32 43 -24 3 25 42 7
PAT 141 140 111 60 68 -289 -109 -130 -112 23
Source :- Company Reports, The Valuation School Research

Exhibit 11 : Supplemental Metrics

Particulars (Rs. bln) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Trend
EBITDA 348 392 383 295 314 246 179 322 247 318
EBIT 237 258 216 116 99 10 -34 87 -1 69
EPS 48.8 48.7 38.4 21.0 23.6 -100.2 -35.5 -39.2 -33.8 7.1
Effective Tax Rate 25.3% 35.2% 21.4% 34.9% 38.9% 7.8% -3.7% -24.3% -60.4% 23.0%

Source :- Company Reports, The Valuation School Research

Exhibit 12 : Key Ratios Movements

Particulars FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
EV/Total Revenue 0.7 0.8 0.6 0.7 0.5 0.4 0.4 0.7 1.0 0.7
EV/EBITDA 4.4 5.5 4.3 6.7 4.9 4.8 5.2 5.7 10.9 8.1
EV/EBIT 6.5 8.3 7.6 17.0 15.7 118.0 -27.1 21.3 -2,692.0 37.2
P/E 8.3 10.4 10.6 21.8 14.4 -2.1 -2.6 -7.5 -12.9 86.3
ROE 21.3 24.8 14.6 12.8 9.4 -47.9 -19.1 -24.3 -25.6 5.3
ROA 6.3 5.8 4.3 2.7 2.7 -9.8 -3.7 -3.9 -3.4 0.7
Source :- Company Reports, The Valuation School Research

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Tata Motors Limited

Peer Comparison
Exhibit 13 : Peer Stock Performance

Peer Stock Performance (1Y) - Indexed

250

230

210

190

170

150

130

110

90

70

50
Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23

Tata Motors Olectra Greentech Maruti Suzuki Mahindra & Mahindra Ashok Leyland
Source :- Yahoo Finance

Exhibit 14 : Peer Stock Performance

S.No. Name CMP Mktcap ROCE % P/E ROE % Debt / Eq ROA EPS PEG Int Coverage
1 Tata Motors 607 222010 6.1 20.0 5.6 3.0 0.9 32.0 -1.0 2.1
2 Ashok Leyland 187 54862 12.0 31.6 15.1 3.6 2.7 6.1 -4.4 2.2
3 Olectra Greentech 1124 9222 13.3 137.9 8.1 0.2 4.9 8.2 2.8 4.0
4 M&M 1547 192393 13.6 17.9 18.1 1.6 10.8 1.8 5.5 3.2
5 Maruti Suzuki 9322 281637 14.5 29.0 11.5 0.0 18.4 50.1 8.5 60.2
6 Force Motors 3332 4391 4.7 39.5 1.7 0.5 10.1 -1.5 0.8 3.6
Source : Screener.in

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Tata Motors Limited

Analyst Coverage Universe

S.No. Date Research House Rating Price at Reco Target

1 15-May-23 HDFC Securities Sell 516 457
2 15-May-23 Prabhudas Lilladhar Buy 530.85 605
3 17-May-23 Geojit BNP Paribas Hold 515.5 564
4 19-May-23 ICICI Securities Limited Buy 508.45 615
5 08-Jun-23 ICICI Direct Buy 559.7 700
6 08-Jun-23 Motilal Oswal Buy 559.7 650
7 08-Jun-23 Prabhudas Lilladhar Buy 559.7 605
8 15-Jun-23 ICICI Securities Limited Accumulate 570.3 620
9 10-Jul-23 Sharekhan Buy 621.45 720
10 26-Jul-23 HDFC Securities Sell 641.1 520
11 26-Jul-23 Prabhudas Lilladhar Buy 641.1 760
12 26-Jul-23 ICICI Securities Limited Accumulate 639.45 699
13 26-Jul-23 Motilal Oswal Buy 641.1 750
14 28-Jul-23 ICICI Direct Buy 635.3 810
15 01-Aug-23 KRChoksey Buy 644.3 743
16 08-Aug-23 Geojit BNP Paribas Buy 607.3 737

Source : Trendlyne

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