What Is Tata Motors’s Fundamental Value Based On Expected Fiscal 2017 Results?

-62.32%
Downside
25.14
Market
9.47
Trefis
TTM: Tata Motors logo
TTM
Tata Motors

Tata Motors‘s (NYSE:TTM) stock has declined 16% in the last month alone on the news of the ousting of Tata Group’s holding company Tata Sons’ former chairman Cyrus Mistry, who still remains the chairman of Tata Motors, and the subsequent announcement of weak results in the second quarter of fiscal 2017 (ended September 2016). However, the turmoil at the helm of the management might not impact the operations and workings of Tata Motors, and the quarterly results also reflect short-term impacts due to revaluation of assets and liabilities and hedging losses. This means that the core performance of Tata Motors remains strong. In particular, Jaguar Land Rover continues to solidly perform this year.

Jaguar Land Rover is the most important division for Tata Motors, as it contributes over 90% of the group’s valuation as per our estimate. This is because of the higher price points, broader margin, and higher anticipated future growth in sales for this division compared to the standalone division. JLR has reported record-breaking results for the first ten months, selling 480,350 vehicles between January and October, up 23% year-over-year.

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According to our estimates, JLR will continue to witness high growth in volume sales over the next few years, especially considering the automaker has opened its Brazilian production plant, and is planning a new plant in Slovakia, which will augment its supply. Trefis estimates Jaguar’s unit sales to grow at a CAGR of 9% between fiscal 2017 (ending March 2017) and fiscal 2024, and Land Rover’s unit sales to grow at a CAGR of 10%.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Tata Motors

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