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Buy rating to Tata Motors shares: Deutsche Bank

Jul 07 2014, 10:23 IST
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SummaryCloudy days ahead, weak volume trend in commercial vehicle continues.

Tata Motors' domestic medium and heavy commercial vehicle (MHCV) volumes in June-14 at 9,620 units (-13.6% y-o-y) remained weak after declining by 23% in FY14. Our channel checks reflect some moderation in discounting, however, it continues to be at significantly high levels (10%+ on the headline ASP—average selling price—for key models) reflecting persistence of weak demand environment. We expect MHCV industry demand to revive over FY15-17 (18% p.a.).

Our FY15 volume growth forecast of 15% for Tata Motors implies a monthly run-rate (MRR) of 11,062 units for the next 9 months vs. YTD rate of 9,053 units.


Light commercial vehicle (LCV) June-14 volumes at 17,212 units (-33% y-o-y) also continued to be weak. Tata Motor’s LCV volumes declined by 32% in FY14 and company lost 940 bps market share over FY13. Our FY15 volume growth forecast of 12% implies a MRR of 28,024 units over the next nine months vs. YTD rate of 16,002 units.

Other highlights

n Passenger car volumes at 5,933 units declined by 38% y-o-y after declining by 39% in FY14. Our FY 15 volume growth forecast of 4% implies a MRR of 10,330 units over the next nine months vs. YTD MRR of 6,173 units.

n Domestic utility vehicles (UVs) volumes at 1,978 units declined by 9% y-o-y. Our FY15 volume growth forecast of 14% implies a MRR of 3,291 units for the next 9 months vs. YTD MRR of 2,021 units. Total exports volume for the month declined by 5% y-o-y to 3,814 units.

Maintain Buy on favourable prospect of JLR’s product pipeline, with a target price of R480. The stock trades at 3.5xFY16e EV/Ebitda on a consolidated basis.


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