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MOSL: Morning India (1/June/18): 1. EcoScope: GDP growth picks up sharply in 4QFY18; 2. Tata Motors; 3. SAIL; 4. Aegis Logistics; 5. Blue Star; 6. CG Power & Inds; 7. KNR Const

MOrning India (1/June/18): 1. EcoScope: GDP growth picks up sharply in 4QFY18; 2. Tata Motors; 3. SAIL; 4. Aegis Logistics; 5. Blue Star; 6. CG Power & Inds; 7. KNR Const; 8. Prime Focus

 

Today’s top research idea

Tata Motors | Stress Test: How low can the stock price go?; Liquidation value at ~INR256/share; favorable risk-reward at CMP

• We assess liquidation value for TTMT at ~INR256/share or ~10% downside from current level. This is after considering intangible assets at 35% of book value (based on 35% capitalization rate).
• Interestingly, even during Global Financial Crisis (GFC) and worst financials ever for JLR (EBIT margins of -6.5% in FY09), similar health of India financials (EBITDA margins at 6.7% in FY09) and negative CFO, bottom valuations for TTMT was at 0.9x during 3QFY09.
• We see several drivers for operating performance over 1-2 years in form of a) Demand recovery for JLR as base normalizes and full benefit of new launches reflect in FY19, b) Continued moderation in realized Fx hedge losses in 1HFY19 and Fx starting to contribute positively from 2HFY19 and c) Lower cost Slovakia plant supporting profitability.
• At current price, we see very favourable risk-reward scenario for TTMT, with worst case downside of ~13% and base case upside of ~66%. Buy with TP of INR471.

Piping hot news

Government to ask ONGC to bear fuel subsidy to help cut petrol, diesel price

• The government may ask state-owned Oil and Natural Gas Corp bear fuel subsidy to help cut petrol and diesel prices, sources said today. The government does not want to cut excise duty and is looking at alternative means to reduce petrol and diesel prices that had on Tuesday touched an all-time high of Rs 78.43 per litre and Rs 69.31 a litre, respectively.