Brokerages raise target price on Tata Motors post Q3 results

Feb 11 2014, 20:15 IST
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Tata Motors net revenue surged 38.6% at Rs 63,876.8 crore, beating analysts estimates of Rs 62,109 crore. Reuters Tata Motors net revenue surged 38.6% at Rs 63,876.8 crore, beating analysts estimates of Rs 62,109 crore. Reuters
SummaryTata Motors net revenue surged 38.6% at Rs 63,876.8 crore, beating analysts estimates of Rs 62,109 crore.

Shares of Tata Motors gained 5.06% in intra-day trade on Tuesday with brokerages raising their target price for the stock after the automaker reported a 195% y-o-y rise in its net profit to Rs 4,804.80 crore in the third quarter (Q3).

On Tuesday, the stock opened at Rs 381.25 or 4.73% higher before closing at Rs 374.30 - a gain of 2.83% or Rs 10.30. Jefferies, JP Morgan, HDFC Securities, Ambit Capital, Goldman Sachs, Axis Capital, Edelweiss, Barclays, Nomura and Credit Suisse have all raised their target price on the stock.

Analysts are of the view that JLR’s global presence makes the stock attractive at current valuations. “Tata Motors trades at 8-times FY15e EPS of Rs 42.8/sh and 4.1-times EV/EBITDA on a consolidated basis, making valuations quite attractive for a global luxury player. Any decline in global luxury demand remains key risk to investment thesis,” said HDFC Securities analyst Sorabh Talwar in a research report.

At the current market price, the stock is trading 8.2% below its life-time high of Rs 405.      

“We remain encouraged by the growth prospects at JLR. Further, management’s sustained investments in the local business (despite the downturn) will likely stem market share losses. We increase our FY15/16 earnings estimates by 5-3% and raise our sum-of-the-parts-based Mar-15 price target to Rs 450,” said JP Morgan analysts Aditya Makharia and Arjun A Bhatia in a research note. JP Morgan’s previous target price stood at Rs 445.

Tata Motors announced their Q3 earnings on Monday post market hours. The Mumbai-based company’s net revenue surged 38.6% at Rs 63,876.8 crore, beating analysts estimates of Rs 62,109 crore.

In the earnings call, company’s chief financial officer Chandrasekaran Ramakrishnan observed, “The financial performance in this Q3 as it has been in the last few quarters has been a one of contrast, a continued underperformance in the India business and quarter-after-quarter strong performance at Jaguar Land Rover, UK.”

Analysts add that discounting trends and slow revival of industrial cycle remain key risks to the stock price. “Any increase in discounting trends by luxury original equipment manufacturers (OEMs) and a delayed revival in the local industrial cycle remain key risks,” JP Morgan analysts added.

Shares of Tata Motors have been subdued in 2014 so far. The stock has shed 0.56% in year-to-date. In 2013, the stock ended with gains of more than 20%.

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