MOSL: TATA MOTORS (Upgrade to Buy)-JLR recovery visible, India bottoming out
TATA MOTORS: JLR recovery visible, India bottoming out; upgrading to Buy
(TTMT IN, Mkt Cap USD5.6b, CMP INR127, TP INR185, 46% Upside, Upgrade to Buy)
- revenue declined ~9% YoY to ~INR654.3b (est. of ~INR632.2b) in 2QFY20. EBITDA grew ~8% YoY to ~INR71.6b (est. of ~INR44.9b). Adj. net loss was at ~INR1.9b (est. of ~INR14.8b) v/s ~INR5.6b in 2QFY19. For 1HFY20, revenue/EBITDA fell 8.5%/13% YoY; net loss was at ~INR37.9b.
- JLR - mix, low VME/warranty boost margins: JLR's performance was strong, with the EBITDA margin at 13.8% (est. of 7.7%) - one of the highest in four years. This reflects (a) a recovery in China and resilient US/EU, (b) a better mix, (c) Project Charge delivery, (d) lower D&A and (e) favorable FX. PBT before EO stood at GBP166m (est. of GBP77m loss). FCF was negative at GBP64m (v/s GBP623m in 2QFY19).
- S/A - operating deleverage, write-off in PV business hurt margins: India business was impacted by inventory reduction, resulting in retails coming in higher by ~27k than wholesales in 2Q. India business disappointed with an EBITDA loss of ~INR1.7b (est. of +INR2.2b) due to write-off of ~INR2.33b in PV and operating deleverage. Adj. net loss was at ~INR13.4b (est. of INR6b). CV/PV inventory was comfortable at 35/48 days.
- Equity issuance of INR64.9b at ~INR150/sh via preferential allotment to Tata Sons: TTMT would issue 201.6m ordinary shares (amounting to INR30.24b) and ~231.3m warrants convertible at ~INR150/sh (amounting to INR34.7b). Post allotment of ordinary shares/warrants, the promoter stake would rise to 39.5%/43.7% from 35.3%, leading to a dilution of 6.8%. Proceeds will be used to repay debt (net auto debt: ~INR500b).
Tata Motors is an automobile company, engaged in the manufacture and sale of commercial and passenger vehicles primarily in India. Co. provides cars, utility vehicles, trucks, buses, and defense vehicles, as well as develops electric and hybrid vehicles for personal and public transportation. In addition, Co. is engaged in the provision of engineering and automotive applications, as well as machine tools and factory automation applications; construction equipment manufacturing; automotive vehicle components manufacturing, among others. Co. markets its vehicles in Europe, Africa, the Middle East, South East Asia, South Asia, and South America.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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