Result Update

Tata Motors Jun 11, 2018

Industry CMP Revised Target

Automobile Rs. 312 Rs. 420

Q4 FY18: JLR drives 18% yoy revenue growth

Consolidated revenue up 18.2% yoy to Rs 91279 Cr led by higher volumes from JLR. Adjusted EBITDA margin
expanded 90bps yoy to 12.5%. JLR margin surged 260bps qoq to 13.4%, however standalone margin contracted
50bps qoq to 7.5%. PAT for the quarter stood at Rs 2115cr, -51% yoy. For FY18, consolidated revenue inc reased
HDFC Scrip Code TELLTD 9% while EBITDA was flat yoy at Rs 33,816cr. PAT was down 39% yoy on the back of weak margin, higher
BSE Code 500570 depreciation and interest expenses. Overall debt increased ~Rs 4000cr to ~Rs 82500cr. Company has cash &
equivalents of Rs 34000cr as on Mar 2018.
NSE Code TataMotors
Management expects a strong all-round performance in FY19, with improvement in both volume and profitability.
Bloomberg TTMT
JLR EBIT margin target stands at 4-7% (vs. 3.8% in FY18) between FY19-21, led by better scale, cost reduction
CMP as on 11 Jun’18 312 efforts, ramp up of low cost Slovakia plant and reduction in forex losses. In comparison, Standalone EBIT margin
Equity Capital (Rs cr) 679 target stands at 3-5% (vs 0.5% in FY18), led by better scale and cost reduction efforts.
Face Value (Rs) 2
It is to be noted that standalone revenues contribute ~12% to the revenues and 8% to the EBIT. So, JLR continues
Equity O/S (cr) 289 to remain key contributor to the company’s overall performance. Company has guided lower foreign exchange loss
Market Cap (Rs Cr) 90220 in the next two years.
Book Value (Rs) 29.2
Other Highlights
Avg. 52 Week Vol 89540
52 Week High (Rs) 470  In PV business, it is aspiring to be the third largest player in the Indian PV industry and hopes to be in the
52 Week Low (Rs) 282 consideration set of car buyers in India. This, coupled with a continuous focus on optimizing cost and capex,
would facilitate a turnaround in the PV business.

Shareholding Pattern (%)  Management guides market share gain in domestic market with improvement in profitability in Indian
Promoters 36.4 operations.
Institutions 48.3
Non Institutions 15.3  JLR volumes to grow in high single digit over FY18-20E.

 JLR has several levers, both cyclical and structural, in the form of (a) favorable FX, as realized hedge rates
improve from 4QFY18, (b) operating leverage, (c) cost savings on modular platform on full rollout of
modular strategy, and (d) low-cost Slovakia plant. The convergence of the multiple factors stated above is
expected to drive performance.
Kushal Rughani
kushal.rughani@hdfcsec.com

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 Result Update
Tata Motors Jun 11, 2018

View & Valuation

We are confident on strong domestic business turnaround and change in JLR growth fortune s post SUV launches. Key
risks to our assumptions would be a) sharp slowdown in global and Chinese luxury car demand, b) lack of product
acceptability in domestic PV business. We remain positive on Tata Motors owing to continued volume momentum and
impending margin triggers. We expect 13% revenues led by robust volume growth from JLR and strong momentum in
domestic volumes. We estimate strong 150bps margin expansion led by operational efficiencies and strong volumes.
Strong revenues and robust operational numbers would drive 50% PAT cagr over FY18-20E. We have tweaked estimates
for FY19 and FY20 downwards after dismal FY18 numbers. We revise our target price to Rs 4 20 based on recent
performance.

Financial Highlights
Rs cr Q4 FY18 Q4 FY17 yoy Q3 FY18 qoq FY17 FY18 FY19E FY20E
Net Revenues 91279 77217 18.2 74156 23.1 269693 294619 344853 377950
EBITDA 11369 10801 5.3 8544 33.1 33498 33817 41980 49150
EBITDA Margin 12.5 14.0 11.5 12.4 11.5 12.2 13.0
APAT 2115 4296 -50.8 1199 76.4 10249 6304 11530 14733
EPS (Rs) 6.2 12.6 -50.8 3.5 76.4 30.2 18.6 33.9 43.4
P/E 10.4 17.0 9.3 7.3
EV/EBITDA 4.1 4.2 3.6 3.1
Source: Company, HDFC sec Research

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 Result Update
Tata Motors Jun 11, 2018

Price Chart

500

450

400 RECOMMENDATION HISTORY

350 Date Reco Price Reco Target

300
6 May - 2017 Rs 420 Buy Rs 498
250
14 Aug’17 Rs 374 Buy Rs. 498
200

150 11 Jun’18 Rs 312 Hold Rs 420

100

50

Rating Definition:

Buy: Stock is expected to gain by 10% or more in the next 1 Year.

Sell: Stock is expected to decline by 10% or more in the next 1 Year.

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 Result Update
Tata Motors Jun 11, 2018

Disclosure:
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or view(s) in this report.
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conflict of interest.
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4|P age
 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Industry CMP Recommendation Add on dips to Target Time Horizon

Auto Rs. 374 Buy at CMP and add on declines Rs. 337-374 Rs. 498 4 Quarters

Company Background

Tata Motors, a Tata Group enterprise is engaged in manufacturing of motor vehicles. The Company is engaged
HDFC Scrip Code TELLTD mainly in the business of automobile products consisting of all types of commercial and passenger vehicles,
BSE Code 500570 including financing of the vehicles sold by the Company. The Company's segments include automotive
NSE Code TATAMOTORS operations and all other operations. The Company's automotive segment operations include all activities relating
Bloomberg TTMT to the development, design, manufacture, assembly and sale of vehicles, including vehicle financing, as well as
CMP - Aug 11 2017 Rs. 374 sale of related parts and accessories. In the automotive segment, the Company manufactures and sells
passenger cars, utility vehicles, light commercial vehicles, and medium and heavy commercial vehicles.
Equity Capital(Rscr) 679
Company has its subsidiary Jaguar Land Rover (JLR) through which it sells Jaguar and Land Rover cars across
((mn(Rscr)
Face Value (Rs) 2 the world. The Company's all other operations segment mainly includes information technology (IT) services,
Eq Share O/S(crs) 289 and machine tools and factory automation services. The Company operates in over 160 countries across the
Market Cap (Rs crs) 108103 world.
Book Value (Rs) 257
Avg. 52 Wk 8581783 Investment Rationale
Volumes
52 Week High 599
Tata Motors posted cumulative sales volumes of 5.43 lakhs in FY17
52 Week Low 376
Cumulative sales (including exports) of the company for the fiscal was at 542,561 nos., higher by 6% over
Shareholding Pattern (%) 511,705 vehicles, sold last year. Cumulative sales of commercial vehicles in the domestic market for the fiscal
was up by 1% at 385,373 nos. over last year. Passenger vehicles in the domestic market for the fiscal were at
Promoters 34.7
153,151, a growth of 22% compared to 125,946.
Institutions 57.2
Non 8.1 Aims Sales of 2.5 lakhs Passenger Vehicles in domestic market in FY18
Institutions

PCG Risk Tata Motors has set an aggressive passenger vehicle sales target for 2017-18. The company aims to sell 250,000
Rating*
Yellow units of cars and utility vehicles in the year FY18. Tata Motors is hoping the domestic operations will be able to
swing back to profitability by 2018-19. If the company is able to meet the targets, the sales would be the
* Refer Rating explanation
highest in four years. The company had sold 3,71,350 passenger vehicle units in 2012-13. In FY17, Tata Motors
Kushal Rughani had sold 1,72,504 units, up 15% from a year ago, against 1,49,420 units a year ago.
kushal.rughani@hdfcsec.com

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 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Q1 FY18 Highlights and Takeaways

Domestic business recovery underway: TTMT is undertaking various initiatives to increase market share in the PV and CV
segments. To address the product gaps in its PV portfolio, it will launch Nexon UV by Sept-18. Reduction in the number of
suppliers and in time to market, improvement in service quality and expansion of touch points are the steps being undertaken
to increase market share in both segments by 5% over the next two years.

JLR: Rich product mix and lower forex losses to benefit: Management guided that margins would benefit from the positive
impact of new model launches and lower cost structure (higher mix of new models). Higher realised hedge losses along with
high advertising expenditure will add to the burden. Over the medium-term, management is guiding for 8-10% EBIT margin
(implying EBITDA margin of 14-16%) for the medium term.

Near-term outlook:
We expect Q2 JLR volumes to be strong, driven by the launch of the new Discovery and RR Velar.

Tata Motors’ (TTMT) 1QFY18 performance was a miss on account of lower JLR margins (7.9%), led by lower
volumes, higher costs associated with launches and rise in staff costs. Standalone margins also were below
estimates, owing to an inferior product mix and GST transition-related costs.

Management guided that hedging losses could reduce in subsequent quarters. Also, the model mix is likely to
turn favourable with the ramp-up of sales for Discovery and Velar, thereby improving margins. Post
commissioning of the Slovakia plant, capex intensity for JLR is likely to reduce from FY19. This, coupled with an
improvement in operating performance, would improve free cash flows in FY18E and FY19E.

With Tiago and Tigor’s favourable start and new launches scheduled over FY18E, we believe the worst is over
for the PV business. In May, 2017, we had recommended as BUY on stock at Rs 420 and add on dips to Rs 380
with target price of Rs 498. After the report, the stock had reached near to our target levels at around Rs 485.
Now, that after correction from the Rs 480 levels, Stock has reached to our lower band and we maintain faith
and reiterate BUY on the stock with TP of Rs 498. After weak results for the first quarter we cut FY18/FY19
estimates and introduce FY20 estimates. We maintain BUY with SOTP-based TP of Rs 498.

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 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Maintain BUY with Target price of Rs 498

In FY17, Tata Motors had posted 6% volume growth in domestic market led by strong 22% rise from passenger vehicles volumes while we
expect the growth momentum to accelerate and see ~9% cagr over FY17-20E which would in turn drive profitability in the domestic business
as well. We estimate 12% revenues cagr led by healthy business growth from Domestic market and strong growth momentum from JLR sales
over FY17-20E.

JLR has young product portfolios especially in luxury SUV market. We expect recent launches and new product pipeline from JLR to result in
robust sales growth. Post its current capex cycle, we expect operating leverage to kick-in from FY18. We expect 160bps expansion in operating
margin led by operational efficiency over the same period. We forecast 20% PAT cagr led by strong revenues and operating performance over
FY17-20E.

We recommend BUY on Tata Motors at CMP of Rs 374 and add on dips to Rs 337 with TP of Rs 498. The stock trades at ~8.5x/~7.2x FY19E/20E
EPS. Our SOTP-based valuation comes to Rs 498 (assigning 3.9x FY20E EV/EBITDA to; implied ~9.5x FY20E consol EPS). We are fairly
confident on strong domestic business turnaround and change in JLR growth fortune post SUV launches. Key risks to our assumptions would
be a) sharp slowdown in global and Chinese luxury car demand, b) lack of product acceptability in domestic PV business and c) To maintain
cost advantage in CV business post BS VI.

Financial Summary

(Rs bn) 1QFY18 1QFY17 YoY (%) 4QFY17 QoQ (%) FY16 FY17 FY18E FY19E FY20E
Net Sales 585 659 (11.2) 772 (24.2) 2,730 2,697 3,021 3,413 3,857
EBITDA 58 85 (31.9) 118 (51.0) 383 335 361 447 516
APAT 32 18 80.8 43 (26.2) 150 102 92 152 179
Diluted EPS (Rs) 9.4 5.2 80.8 12.8 (26.2) 44.3 30.2 27.1 44.8 52.8
P/E (x) 8.6 12.5 14.0 8.4 7.1
EV / EBITDA (x)* 4.3 6.0 5.5 3.8 3.0
RoE (%) 22.0 12.2 10.1 14.9 15.2

Source: Company, HDFC sec

3|Page
 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Q1 FY18 Results Table

Particulars 1QFY18 1QFY17 YoY (%) 4QFY17 QoQ (%)

Net Sales 584,934 658,949 (11.2) 772,172 (24.2)
Material Expenses 365,758 390,908 (6.4) 475,152 (23.0)
Employee Expenses 71,152 74,664 (4.7) 70,274 1.3
Other Operating Expenses 90,251 108,537 (16.8) 108,871 (17.1)
EBITDA 57,773 84,840 (31.9) 117,875 (51.0)
Depreciation 45,246 45,508 (0.6) 46,702 (3.1)
EBIT 12,527 39,332 (68.2) 71,173 (82.4)
Other Income 1,541 1,736 (11.2) 2,342 (34.2)
Interest Cost 11,089 11,694 (5.2) 11,640 (4.7)
Product Development Cost 8,124 8,711 (6.7) 9,864 (17.6)
Forex gain/(loss) (6,313) 54 (11,768.4) (452) 1,296.9
PBT 1,168 20,608 (94.3) 52,463 (97.8)
Tax 12,074 7,200 67.7 12,396 (2.6)
RPAT (10,907) 13,408 (181.3) 40,067 (127.2)
Share of profits in associates/JVs 6,704 4,290 56.3 4,106 63.3
EO Items (Adj For Tax) (36,202) - - 808 (4,579.9)
APAT 31,999 17,698 80.8 43,364 (26.2)
Adj EPS 9.4 5.2 80.8 12.8 (26.2)
Source: Company, HDFC sec Research

4|Page
 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Quarterly Snapshot (Standalone)

Pre-buying in 4QFY17, delay in
production, GST transition pain (Rs mn) 1QFY18 1QFY17 YoY (%) 4QFY17 QoQ (%)
impact and higher competition
CV (Domestic, in units) 60,446 78,328 (22.8) 91,459 (33.9)
led to lower CV volumes PV (Domestic, in units) 34,858 31,966 9.0 43,962 (20.7)
Exports (in units) 9,529 13,816 (31.0) 15,647 (39.1)
Realisation improved by 4% YoY
Total volumes (in units) 104,833 124,110 (15.5) 151,068 (30.6)
to Rs 867k/unit despite GST-
Net Sales 90,943 103,196 (11.9) 135,867 (33.1)
related discounts and weaker
Material Expenses 64,202 68,865 (6.8) 95,608 (32.8)
mix with lower MHCV volume
Employee Expenses 8,886 8,983 (1.1) 9,325 (4.7)
(success of Tiago, Tigor and Hexa
Other Operating Expenses 17,745 18,443 (3.8) 22,818 (22.2)
provided some cushion)
EBITDA 111 6,905 (98.4) 8,115 (98.6)
Negative operating leverage Depreciation 6,748 7,122 (5.3) 8,096 (16.7)
took a hit on profitability with EBIT (6,637) (218) 2,945.9 19 (35,783.3)
EBIDTA margin at 0%, down Other Income 6,399 6,246 2.5 1,143 459.8
650bps YoY Interest Cost 3,678 3,401 8.2 4,545 (19.1)
Product Development Cost 752 1,162 (35.2) 1,915 (60.7)
Management has indicated 6 PBT (4,669) 1,465 (418.6) (5,298) (11.9)
new product launches in its Tax 2 121 (98.3) 109 (98.2)
M&HCV portfolio, while it RPAT (4,671) 1,344 (447.5) (5,407) (13.6)
expects a ramp-up in Tiago, EO Items (Adj For Tax) - 1,087 (100.0) 2,883 (100.0)
Tigor and Hexa, along with the APAT (4,671) 258 (1,913.8) (8,290) (43.7)
soon-to-be-launched Nexon, to Adj EPS (1.5) 0.4 (447.5) (1.7) (13.6)
drive its PV segment over FY18
Source: Company, HDFC sec Research

5|Page
 Tata Motors PICK OF THE WEEK
Aug 14, 2017

in £Mn FY16 FY17 FY18E FY19E FY20E

Revenue 22,208 24,339 27,303 31,625 34,838
% growth (YoY) 1.6 9.6 12.2 15.8 10.2
Wholesales volumes (in '000) 544 601 661 738 783
% growth 15.6 10.4 10.1 11.6 6.1
Expenditure
Material cost 13,146 15,071 16,873 19,734 21,913
% of sales 59.2 61.9 61.8 62.4 62.9
Employee cost 2,321 2,490 2,921 2,846 2,996
% of sales 10.5 10.2 10.7 9.0 8.6
Other expenses 4,670 5,249 5,734 6,325 5,748
% of sales 21.0 21.6 21.0 20.0 16.5
Addback R&D Cost (1,560) (1,783) (1,900) (1,800) (1,800)
% of sales (7.0) (7.3) (7.0) (5.7) (5.2)
R&D cost expensed 318 357 380 324 324
Total 18,895 21,384 24,008 27,430 29,182
% of sales 85.1 87.9 87.9 86.7 83.8
EBITDA 3,313.0 2,955.4 3,294.7 4,195.8 5,656.6
% of sales 14.9 12.1 12.1 13.3 16.2
Other Income - - - - -
Depreciation and amortization 1,403 1,656 1,834 2,153 2,418
Interest expense 54 35 45 19 9
Forex gain/(loss) (27) 36 - - -
Share of profit/(loss) from joint venture 66 159 170 180 225
% of sales 0.3 0.7 0.6 0.6 0.6
PBT 1,895 1,459 1,585 2,204 3,455
% of sales 8.5 6.0 5.8 7.0 9.9
Tax 247 338 344 536 856
Tax rate % 13.0 23.2 21.7 24.3 24.8
APAT 1,649 1,121 1,241 1,667 2,599
% of sales 7.4 4.6 4.5 5.3 7.5
RPAT 1,326 1,272 1,241 1,488 2,374
% of sales 6.0 5.2 4.5 4.7 6.8
Source: Company, HDFC sec Research
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 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Rs in Mn FY16 FY17 FY18E FY19E FY20E

Vehicle Sales (in units)
CV (Domestic) 327,730 330,430 346,852 380,776 420,373
PV (Domestic) 125,945 146,492 190,204 201,576 210,046
Exports 57,991 64,950 62,073 66,168 72,372
Total 511,666 541,872 599,129 648,520 702,791
% YoY (0.3) 5.9 10.6 8.2 8.4
Net Sales 428,455 443,640 483,568 556,103 640,458
% YoY 19.4 3.5 9.0 15.0 15.2
Other Operating Income - -
Total Income From Operations 428,455 443,640 333,662 389,272 451,523
Expenditure 69.0 69.3 70.5
RM Cost 291,094 313,489 38,200 41,152 46,753
% Of Sales 67.9 70.7 7.9 7.4 7.3
Employee Cost 31,890 35,585 85,775 92,097 94,419
% Of Sales 7.4 8.0 17.7 16.6 14.7
Other 71,823 77,559 457,637 522,521 592,696
% Of Sales 16.8 17.5 84.6 81.9 84.6
Total Expenses 394,806 426,633 25,931 33,582 47,763
% Of Sales 83.3 86.9 5.4 6.0 7.5
EBITDA 33,648 17,007 17,645 17,877 18,111
EBITDA Margin % 7.9 3.8 5,000 5,600 6,384
Other Income 14,023 9,788 29,960 29,920 31,925
Product Development Expenses 4,183 4,545 12,889 9,966 10,464
Depreciation 23,292 29,694 (4,273) 5,974 17,101
Interest 15,920 15,902 (16,273) 5,974 17,101
PBT (Pre-exceptional Items) 4,276 (23,345) 346,852 380,776 420,373
PBT (Pre-exceptional And JLR Dividend) (10,041) (37,745) 190,204 201,576 210,046
Source: Company, HDFC sec Research

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 Tata Motors PICK OF THE WEEK
Aug 14, 2017

SOTP Valuation

Valuation methodology Multiple Per share

Standalone EV / EBIDTA on Jun-19E 7.8 54
JLR EV / EBIDTA on Jun-19E 3.8 453
China JV EV / EBIDTA on Jun-19E 4.0 28
Other Subsidiaries P/E, PBV on Jun-19E 25
Less: Net Automotive Debt (62)
Target Price 498
Source: HDFC sec Research

JLR numbers for Jul 2017

Jul-17 Jul-16 YoY% Apr-Jul 17 YoY

JLR 46074 44058 4 219891 4
Jaguar 12964 12748 -1.8 54230 21
Land Rover 33110 31308 5.8 129307 -2

Source: company, HDFC sec Research

8|Page
 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Jaguar Land Rover Share of RR+RRS % - RHS UK NA China Europe ROW

100 17 16
100.0% 35.0% 15 15
18 22 21 17 17
30.0% 80
80.0% 30 30 30
29 18 27 29 30
25.0% 27
60
60.0% 20.0% 13 12 12 12
11 11 10
14 11
15.0% 40
40.0% 23 21 25 21 25
20 22 25 29
10.0%
20
20.0%
5.0% 19 25 19 24 19 23 18 25 22
0.0% 0.0% -

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

4QFY17

1QFY18
1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

4QFY17

1QFY18
Source: Company, HDFC sec Research Source: Company, HDFC sec Research

TTMT’s MHCV Market Share Declined TTMT’s PV Market Share Improved Sequentially
Volumes (in '000) M/S - RHS Volumes (in '000) M/S - RHS
60 55.0% 50 6.0%
45 5.8%
50 40 5.6%
50.0%
40 35 5.4%
30 5.2%
30 45.0% 25 5.0%
20 4.8%
20 15 4.6%
40.0%
10 10 4.4%
5 4.2%
0 35.0% 0 4.0%
1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

4QFY17

1QFY18

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

4QFY17

1QFY18
Source: SIAM, HDFC sec Research Source: SIAM, HDFC sec Research

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 Tata Motors PICK OF THE WEEK
Aug 14, 2017

(Rs bn) FY16 FY17 FY18E FY19E FY20E (Rs bn) FY16 FY17 FY18E FY19E FY20E
Net Revenues 2,730 2,697 3,021 3,413 3,857 SOURCES OF FUNDS
Growth (%) 3.9 (1.2) 12.0 13.0 13.0 Share Capital - Equity 7 7 7 7 7
Material Expenses 1,634 1,659 1,855 2,065 2,403 Reserves 801 866 946 1,086 1,254
Employee Expenses 289 283 317 358 366 Total Shareholders’ Funds 808 873 953 1,093 1,261
Product Development Expenses 35 34 35 31 31 Minority Interest 9 10 11 13 15
Other Operating Expenses 390 386 453 512 540 Long-term Debt 705 735 712 682 692
EBITDA 383 335 361 447 516 Short-term Debt - - - - -
EBITDA Margin (%) 14.0 12.4 12.0 13.1 13.4 Total Debt 705 735 712 682 692
EBITDA Growth (%) (3.1) (12.6) 7.8 23.8 15.5 Net Deferred Taxes 4 8 12 16 22
Depreciation 167 179 206 202 222 Long-term Provisions & Others 205 220 219 227 233
EBIT 216 156 155 245 294 TOTAL SOURCES OF FUNDS 1,731 1,845 1,906 2,030 2,222
Other Income (Including EO Items) 9 8 8 9 8 APPLICATION OF FUNDS
Interest 49 42 45 45 43 Net Block 1,006 1,201 1,309 1,393 1,463
PBT 176 121 118 209 259 CWIP 285 284 288 292 297
Tax (Incl Deferred) 30 33 39 69 77 Goodwill 48 48 48 48 48
Minority Interest (1) (1) (1) (2) (3) Investments 13 13 13 13 13
Profit in respect of investments in Associate Companies 6 15 14 14 (0) LT Loans & Advances 331 365 350 406 431
RPAT 141 75 66 128 185 Total Non-current Assets 1,684 1,910 2,008 2,153 2,252
EO (Loss) / Profit (Net Of Tax) (35) (28) - - - Inventories 334 381 369 394 430
APAT 150 102 92 152 179 Debtors 130 150 145 184 201
APAT Growth (%) 3.9 (31.9) (10.4) 65.8 17.8 Cash & Equivalents 518 363 237 253 362
Adjusted EPS (Rs) 44.3 30.2 27.1 44.8 52.8 Total Current Assets 982 894 751 832 993
EPS Growth (%) (1.5) (31.9) (10.4) 65.8 17.8 Creditors 935 960 853 955 1,023
Other Current Liabilities & Provns
Total Current Liabilities 935 960 853 955 1,023
Net Current Assets 47 (66) (102) (123) (30)
TOTAL APPLICATION OF FUNDS 1,731 1,845 1,906 2,030 2,222
Source: Company, HDFC sec Research

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 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Key Ratios: Consolidated

Cash Flow: Consolidated
(Rs bn) FY16 FY17 FY18E FY19E FY20E
FY16 FY17 FY18E FY19E FY20E
Reported PBT 176 121 118 209 259 PROFITABILITY (%)
Non-operating & EO items (35) (28) - - - GPM 40.2 38.5 38.6 39.5 37.7
Interest expenses 49 42 45 45 43 EBITDA Margin 14.0 12.4 12.0 13.1 13.4
Depreciation 167 179 206 202 222 APAT Margin 5.5 3.8 3.0 4.5 4.7
Working Capital Change (14) (61) (76) (11) (4) RoE 22.0 12.2 10.1 14.9 15.2
Tax Paid (30) (33) (39) (69) (77) RoIC (or Core RoCE) 18.5 9.7 7.4 10.8 13.0
OPERATING CASH FLOW ( a ) 313 221 254 376 444 RoCE 13.5 8.5 7.5 10.6 11.3
EFFICIENCY
Capex (333) (372) (318) (291) (296)
Tax Rate (%) 17.2 26.8 33.0 33.0 29.7
Free Cash Flow (FCF) (21) (151) (64) 85 148 Fixed Asset Turnover (x) 1.4 1.2 1.2 1.2 1.2
Investments 0 - - - - Inventory (days) 44.6 51.5 44.6 42.2 40.7
Non-operating Income 28 18 17 18 6 Debtors (days) 17.4 20.3 17.5 19.7 19.0
INVESTING CASH FLOW ( b ) (306) (354) (301) (272) (290) Payables (days) 125.0 129.9 103.1 102.1 96.8
Debt Issuance/(Repaid) (31) 30 (23) (30) 10 Cash Conversion Cycle (days) (62.9) (58.1) (41.0) (40.2) (37.1)
Interest Expenses (49) (42) (45) (45) (43) Debt/EBITDA (x) 1.8 2.2 2.0 1.5 1.3
FCFE (101) (163) (132) 10 114 Net D/E (x) 0.0 0.2 0.3 0.2 0.1
Share Capital Issuance 130 - - - - Interest Coverage (x) 4.4 3.7 3.5 5.4 6.8
PER SHARE DATA (Rs)
Dividend (1) (10) (12) (12) (12)
EPS 44.3 30.2 27.1 44.8 52.8
FINANCING CASH FLOW ( c ) 49 (22) (80) (87) (45) CEPS 75.9 66.8 78.6 95.4 108.4
NET CASH FLOW (a+b+c) 56 (155) (126) 16 109 Dividend 0.2 2.5 3.0 3.0 3.0
EO Items, Others - - - - - Book Value 237.9 256.9 280.5 321.8 371.2
Closing Cash & Equivalents 518 363 237 253 362 VALUATION
Source: Company, HDFC sec Research P/E (x) 8.6 12.6 14.0 8.4 7.1
P/BV (x) 1.6 1.5 1.4 1.2 1.0
EV/EBITDA (x) 4.3 6.0 5.5 3.8 3.0
EV/Revenues (x) 0.5 0.6 0.5 0.4 0.4
Dividend Yield (%) 0.1 0.7 0.8 0.8 0.8
Source: Company, HDFC sec Research

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 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Rating Chart
R HIGH
E
T
U MEDIUM
R
N LOW
LOW MEDIUM HIGH
RISK

Ratings Explanation:

RATING Risk - Return BEAR CASE BASE CASE BULL CASE

IF RISKS MANIFEST
IF INVESTMENT
PRICE CAN FALL 15%
IF RISKS MANIFEST RATIONALE
LOW RISK - LOW & IF INVESTMENT
BLUE PRICE CAN FALL FRUCTFIES PRICE
RETURN STOCKS RATIONALE
20% OR MORE CAN RISE BY 20% OR
FRUCTFIES PRICE
MORE
CAN RISE BY 15%
IF RISKS MANIFEST
IF INVESTMENT
PRICE CAN FALL 20%
MEDIUM RISK - IF RISKS MANIFEST RATIONALE
& IF INVESTMENT
YELLOW HIGH RETURN PRICE CAN FALL FRUCTFIES PRICE
RATIONALE
STOCKS 35% OR MORE CAN RISE BY 35% OR
FRUCTFIES PRICE
MORE
CAN RISE BY 30%
IF RISKS MANIFEST
IF INVESTMENT
PRICE CAN FALL 30%
IF RISKS MANIFEST RATIONALE
HIGH RISK - HIGH & IF INVESTMENT
RED PRICE CAN FALL FRUCTFIES PRICE
RETURN STOCKS RATIONALE
50% OR MORE CAN RISE BY 50%
FRUCTFIES PRICE
OR MORE
CAN RISE BY 30%

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 Tata Motors PICK OF THE WEEK
Aug 14, 2017

Price Chart
Reco History
550 Date CMP Reco Target
06-May-17 420 BUY 498
450 14-Aug-17 374 BUY 498

350

250

150

50
Sep-16

Feb-17

Apr-17

Jul-17
Jun-17
Oct-16

Nov-16

Dec-16

May-17
Jan-17

Mar-17
Aug-16

Aug-17
Rating Definition:

Buy: Stock is expected to gain by 10% or more in the next 1 Year.

Sell: Stock is expected to decline by 10% or more in the next 1 Year.

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 Tata Motors PICK OF THE WEEK
Aug 14, 2017

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