Maintain BUY on TTMT with a SOTP-based price target of Rs.571
SUMMARY?
Tata Motors’ (TTMT) Q2FY23 performance was a mixed bag with JLR margin back to 10%; however, India margin was impacted by 200bps (QoQ) due to the lag effect of higher input cost contracts trickling into numbers.
JLR’s EBITDA margin came in at 10.3%, up 400bps QoQ, owing to a combination of the better model mix, improved market mix, and rising scale benefit amidst marginal forex losses.
RR and RR Sport refresh production picked up to 2.4k units a week vs 6k units wholesale in Q1FY23, and thus, the mix is set to improve further from Q3FY23 with a new chip supply agreement coming in place.
Thus, with most headwinds for JLR on the verge of being resolved, we believe JLR is likely to revert towards 12% margin levels, with scope to reverse GBP2bn of working capital-related increase in debt.
India business though impacted temporarily is largely set to reach the targeted 10% EBITDA margin level in coming quarters with margin tailwinds coming in place.
I Bought TTMT @ 521.20 then sold 50% at 539.50. Holding the balance