Tata Motors Latest News Key Point:
- Nomura’s recent report suggests that Jaguar Land Rover’s (JLR) improving margins will result in a significant reduction in Tata Motors’ debt levels.
- JLR is focused on generating more cash flow to reduce its net debt.
- Nomura predicts JLR’s margins will increase from 10.3% in FY23 to 14.1% in FY24, driving a 60% drop in Tata Motors’ debt by FY25.
- JLR’s volumes are expected to rise marginally by 2% to 367,000 units in FY23 and then jump by 28% to 470,000 units in FY24.
- Management notes that demand remains strong, and the order book is robust across JLR, commercial vehicle (CV), and passenger vehicle (PV) businesses.
- CV demand remains strong, and the segment saw a pre-buying trend as consumers tried to stay ahead of new emission norms.
- Despite feeling some pressure in the lower-end PV models, JLR’s order book has not been significantly affected by the high-interest-rate environment.
- Nomura has maintained its buy call on Tata Motors and set a target price of Rs 508, with the stock currently trading at 4.3x FY24EV/EBITDA.
Tata Motors Latest News Details:
Jaguar Land Rover’s Margins Expected to Improve by FY24, Driving Significant Reduction in Tata Motors’ Debt Levels
According to a recent report from Nomura, Jaguar Land Rover (JLR) is expected to improve its margins by FY24, resulting in a significant reduction in Tata Motors’ debt levels. The report suggests that JLR is focused on generating more cash flow to reduce its net debt.
Nomura predicts that JLR’s margins will increase from 10.3% in FY23 to 14.1% in FY24, and this will be the main factor driving Tata Motors’ debt to drop by 60% by FY25. The analysts expect Tata Motors’ debt to fall from Rs 575 billion (Rs 150 per share) to Rs 230 billion (Rs 60 per share) by FY25.
During an interaction with company management at Nomura’s Virtual India Corporate Day, it was revealed that the high-interest-rate environment has not yet affected JLR’s order book significantly. However, there is some pressure being felt in the lower-end passenger vehicle (PV) models.
The report states that JLR’s volumes are expected to rise marginally by 2% to 367,000 units in FY23 and then jump by 28% to 470,000 units in FY24. Management noted that demand remains robust, and the order book is strong.
Nomura has maintained its buy call on Tata Motors and set a target price of Rs 508. Currently, the stock is trading at 4.3x FY24EV/EBITDA, and it is trading at Rs 422, which is a decrease of 0.19% from its previous close.
During the interaction, management also highlighted the performance of different verticals. While demand remains strong across JLR, commercial vehicle (CV), and passenger vehicle (PV) businesses, there has been a softening of demand in the PV business, with dealer inventory increasing. CV demand remains strong, and the segment saw a pre-buying trend as consumers tried to stay ahead of new emission norms that will come into place from April 1, 2023.
About Tata Motors:
Tata Motors is a leading global automobile manufacturer. Part of the illustrious multi-national conglomerate, the Tata group, it offers a wide and diverse portfolio of cars, sports utility vehicles, trucks, buses and defence vehicles to the world.
It has operations in India, the UK, South Korea, South Africa, China, Brazil, Austria and Slovakia through a strong global network of subsidiaries, associate companies and Joint Ventures (JVs), including Jaguar Land Rover in the UK and Tata Daewoo in South Korea.
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