Tata Motors Ltd


JLR supply issues to persist in near-term, but expect gradual easing in H2

BUY

CMP: Rs293  |  Target Price: Rs400

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■    JLR's Q1 EBITDA of GBP449mn (-55% qoq) came in 5% below our estimates. Margin contracted 630bps qoq to 9%, mainly due to delayed semiconductor supplies, resulting in negative operating leverage and emission penalties.

■    JLR's order book is strong at 110,000 units, but wholesales are unable to meet demand. Q1 wholesales (ex CJLR) were low at ~84,000 units, and Q2 guidance is lower at ~65,000 units. Management hopes for an improvement to ~90,000 units in Q3 and a further increase in Q4, led by a pick-up in semiconductor supplies.

■    We reduce consolidated EBITDA for FY22E/23E/24E by 16%/4%/2%, mainly due to lower volume and margin assumptions at JLR. Despite the cut in EBITDA, we expect robust revenue/EBITDA CAGRs of 17%/22% over FY21-24E, led by anticipated sales cycle upturns in standalone and JLR divisions.

■    Near-term stock catalysts include better standalone volumes, probable tie-up of JLR with larger OEMs for licensing of EV platform and possibility of partial divestments of India PV division. In addition, JLR's sales upcycle is expected from H2 onward. Retain Buy with SOTP-based TP of Rs400 at 2x/11x EV/EBITDA on Sep'23E (Mar'23E earlier).

Please see our sector model portfolio (Emkay Alpha Portfolio): Automobiles & Auto Ancillaries

Recommendation History

Recent Research Reports

Tata Motors Ltd: Strong quarter; Focus remains on margins and cash-flows; Retain Buy

Auto & Auto Ancillaries|Q1FY22 Preview: Temporary weakness expected due to lockdowns

Tata Motors Ltd: JLR: Margin expansion and deleveraging remain focus areas

Automobiles|Jun’21 volumes beat estimates; expect further improvement in Q2FY22

Tata Motors Ltd: India biz: cyclical upturn, new products and cost savings to drive earnings performance

Automobiles|Jun’21 preview: Volumes to improve sequentially

Tata Motors Ltd: TaMo 2.0: Lock, Stock and Barrel

Auto & Auto Ancillaries|PVs: Expect swift recovery in volumes; MSIL to sustain share in near term

 

Automobile Sector|Electric Vehicles: FAME II scheme revised with higher incentives for 2Ws

 

Automobiles|May’21 review: Lackluster performance due to lockdowns but swift recovery expected ahead

 

Automobiles|May’21 preview: Temporary sales hit expected due to lockdowns

 

Electric Vehicle Conference|Decoding Electric Vehicle Disruption

 

Automobiles|Apr’21 review: Auto sales hit Covid-19 roadblock again

 

Automobiles|Apr’21 preview: Lockdown dampener to Auto sales

To view more Research Reports visit the Emkay Research Portal.

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